Model Portfolios: Evolving and Expanding Tools for Advisors

Rather than simply recommending old-guard active mutual funds, advisors can add value for clients by considering model portfolios.

Financial advisors who are seeking ways to smooth out a potentially bumpy ride in the years ahead may consider customized strategic and tactical asset allocation strategies through exchange traded fund model portfolios. Model portfolios are offered by asset managers and are typically comprised of ETFs. WisdomTree has one of the industry’s deepest rosters of model portfolios.

See also: Our Investing Toolkit for Q2 2021

Many investors believe that with the use of model portfolios, the advisor is applying the appropriate technical approach by accessing valuable research and data from asset managers, combining these offerings with their intimate knowledge of the client’s specific needs.

“In model portfolios, one of the goals asset managers have is to make them kind of simple and straightforward and easy for an advisor to manage, given that the advisor is the one who has to implement them,” notes Morningstar analyst Jason Kephart.

Model Portfolios: Increasingly Relevant for Advisors

As more financial advisors look for ways to adapt and streamline their businesses, many are turning to outside sources like model portfolio and research providers. Of course, the model portfolio structure is paramount in the evaluation process.

“But for the most part, we’re evaluating them the same way we would evaluate any asset-allocation mutual fund or a target-date fund. We’re looking for things like the quality of the underlying investments. We’re looking at how well they fit together. The portfolio construction part is really important to us,” adds Morningstar’s Kephart.

ETF-managed portfolios are investment strategies that hold more than 50% of assets invested in ETFs and represented one of the fastest-growing segments in the separate accounts space. Specifically, ETF-managed portfolios typically offer three major investment themes: tactical, strategic, and hybrid mixes. The tactical offerings provide short-term plays to capitalize on investment opportunities that are forming, whereas the strategic plays provides long-term allocation across sectors and asset classes. The hybrid mix includes a combination of tactical and strategic elements.

WisdomTree model portfolios feature the issuer’s own ETFs, as well as a slew of funds from other issuers.

The firm’s model portfolio offerings span from disruptive growth equities to fixed income to alternative assets to dividend stocks and alternative assets.

For more on how to implement model portfolios, visit our Model Portfolio Channel.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.