Model Portfolios for Clients: Finding the Right Fit | ETF Trends

Model portfolios can be powerful tools — leveraging research, market insights, and years of experience, these asset manager-crafted offerings save time for advisors to focus on clients. But how should advisors break into the world of model portfolios for clients — and which clients might be most open to working with an advisor to use them? That’s the focus of new research from WisdomTree Investments, which offers some tips on getting the best out of third-party models for advisor practices.

Third-party, model portfolios have grown significantly in recent years, up at least 18% annually over the last five years and expected to reach $10.3 trillion in AUM in the next five. Advisors know the benefits of models — they can even be constructed to express an overall view, like mitigating volatility, for example, or international investments — but which clients are most likely to understand them from the get go?

See more: “WisdomTree Distribution Exec Talks Advisors, Value, Dividends

Some advisors may start with their “smaller accounts” or begin with tax-exempt accounts that may have less friction upping sticks and moving to a new model. According to WisdomTree’s director of client solutions, Ryan Krystopowicz, there may be a better way, with new research backed by psychographic segmentation available to help advisors understand clients.

That research presents two case studies worth examining, archetypes named “Open Oliver” and “Backseat Barbara.” Open Olivers aren’t just loyal clients, but the most open to risk, early adopters with more than $200,000 in income and more than $665,000 in investable assets who may be around 45 years of age.

Backseat Barbara, meanwhile, are older and may already be retired, around 60 years old. They are more interested in the advantages offered by advisors, themselves, like expertise and advice, and are more conservative overall with a bit more to lose in investable assets.

Per WisdomTree’s research, 80% of “Open Olivers” embrace the model portfolios for clients available at asset managers that offer them — with embrace a higher form of approval than simple openness. Backseat Barbaras were more hesitant, but still, 53% were found to embrace models when explained to them appropriately.

Advisors may want to position models with analogies — for example, like a doctor understanding a client’s illness and using a surgery invented by someone else — or emphasize the combined expertise of an asset manager included in a model portfolio for clients. Whichever approach, there are rhetorical and investing tools for model portfolios out there, helping advisors take back time to do what they do best — understand and meet the investing needs of clients.

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