Financial advisors whom are interested in enhancing their practices may consider the impact of outsourcing and explore how ETF model portfolios may add operational efficiency and elevate the client experience.
“The decision to outsource touches on many factors, including the type of practice, business goals and available resources,” Brie Williams, Head of Practice Management, State Street Global Advisors, said on the recent webcast, Model Portfolios: New Research on Growth Drivers and Benefits. “More than half of advisors are leveraging model portfolio solutions because they are looking to scale business and serve more client more efficiently.”
“Deciding to outsource is a big decision – and not a one-size-fits all solution. It’s about the vision you have for the business as well as the overall fit with the practice,” she added.
Williams argued that the competing demands in an everyday advisory business underscores the need for operational efficiencies and economies of scale. For example, the average financial advisor allocates the most time to portfolio management. However, through incorporating outside help through model portfolios, advisors can spend more times in client-facing activities to deepen relationships with existing clients and spend more time prospecting new clients to expand businesses.
Three-quarter of advisors agree there are time advantages to utilizing model portfolios. Advisors believe that using model portfolios is more time efficient than building bespoke portfolios, makes it easier to scale your business and provide more time to focus on what really matters to clients. Additionally, there are benefits to clients as well as benefits to advisors. Advisors can spend more time helping clients make more intelligent financial planning decisions, get more face time with clients and focus on what really matters to their clients.
From the clients’ point of view, many recognize that financial advisors may benefit from model portfolios since the strategies are being constructed by asset managers with more knowledge of the markets and advisors can focus on clients’ needs, such as services that cover financial planning, investment management, retirement planning, portfolio construction and more.
Williams also pointed out that model portfolios have a track record of performance with likely better returns, mitigate risk in a heightened fiduciary landscape, are low cost and help maximize profitability.
Before diving into a model portfolio, Williams advised prospective outsourcers to perform their due diligence eon model providers. Specifically, financial advisors should consider the process, performance, price, resources, reputation, talent, communication and transparency offered by these model portfolio providers.
Robert Spencer, Head of Portfolio Strategy, Investment Solutions Group, State Street Global Advisors, noted that they provide multi-asset investment capabilities to help clients access outcome-oriented solutions through strategic asset allocations, active asset allocations and outcome or specialized allocations. For example, financial advisors may look to State Street Global Advisors, which offers a range of ETF model portfolios, crafted by experts with each one designed and managed by the Investment Solutions Group. The strategies are backed by over 90 portfolio managers, strategists and analysts, covering a range of investment outcomes to provide diversification opportunities across a variety of asset classes and risk profiles.
Jonathan Linstra, Head of ETF Model Portfolios and Advised Solutions, State Street Global Advisors, highlighted a number of model portfolios that financial advisors can utilize according to their client’s circumstances. For example, the Strategic ETF Model Portfolios pursues optimal capital efficiency over a long-term horizon.
The Strategic Opportunities ETF Model Portfolios seeks to capture deviations in return profiles over an intermediate-term horizon.
The State Street Tactical Allocation ETF Portfolios seeks to capitalize on short- and long-term mispricing in the global equity and fixed income markets by overweighting asset classes that appear attractive and underweighting less attractive asset classes.
They also provide Outcome-Based ETF Portfolios that solve for a range of investor needs and desired outcomes, such as the State Street Global Allocation Target Risk ETF Portfolio, State Street US Equity Sector Rotation Target Risk ETF Portfolio, State Street Flexible Allocation ETF Portfolio and State Street Income Allocation ETF Portfolio.
Lastly, there is a Specialized ETF Portfolio that pursues targeted objectives with sophisticated strategies. The State Street Multi Asset Real Return ETF Portfolio seeks to provide thoughtful exposure to real assets, diversification and additional return by using State Street Global Advisors’ tactical asset allocation process to drive active positioning.
Financial advisors who are interested in learning more about ETF model portfolios can watch the webcast here on demand.