Model Portfolios Help Advisors Add Value in a Fee-Frenzied Age

The advisory and asset management businesses are increasingly competitive due in large part to the evolution of low-cost exchange traded funds.

Still, there are ample avenues for advisors to cultivate long-term client relationships, even in an environment increasingly focused on fee pressure.

“Advisors are facing similar competitive pressures. While fees have not felt the same level of downward pressure as in the asset management industry, it is happening. Clients want either lower fees or higher levels of service for the fees they pay,” says WisdomTree Model Portfolios CIO Scott Welch.

“One result is that there has been a distinct shift toward financial planning and holistic advice, and away from investment management as an advisor’s primary value proposition.”

Asset allocation strategies provide advisors with a full or partial portfolio solution through exposure to several investment strategy components, including ETFs and mutual funds.

Model Portfolios Bring Value to the Table

Advisor can highlight the importance of properly identifying model providers through a product-centric lens that includes the provider’s philosophy and process, performance, price, and people involved. Additionally, investors should also consider the firm-centric lens that includes the provider’s reputation, transparency, communications, and resources available.

“Another way to drive scale and efficiency in an enterprise is through the use of outsourcing. There is no shortage of outsource providers in almost every aspect of running a wealth management practice—accounting, legal, marketing, compliance, performance reporting and so forth,” notes Welch. “In the WisdomTree context, this means the use of WisdomTree Model Portfolios. We have written extensively about our models solution, including how the use of models can help drive scale and efficiency in a practice.”

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 a hybrid mix. The tactical offerings provide short-term plays to capitalize on investment opportunities that are forming, whereas the strategic play provides long-term allocation across sectors and asset classes. The hybrid mix naturally includes a combination of tactical and strategic elements.

“WisdomTree has also developed an award-winning Advisor Solutions Program that retains professional experts to help advisors with other aspects of running their practice—optimizing their online presence, recruiting and retaining appropriate professionals, retirement planning, improving communication and persuasion skills, and business transition and succession planning,” finishes Welch.

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.