Commonwealth Financial Network has officially launched its Commonwealth Model Management System, the firm's enhanced trading platform for systematically managing and rebalancing client portfolios. The platform, which has undergone extensive beta testing over the last eight months, is now available to all Commonwealth advisors.
The system allows Commonwealth advisors to scale their practices by building model portfolios, then assigning client funds to one or more models. As markets move and asset values stray from their targets, advisors can rebalance one account, or all their accounts, back to the target weightings with a few mouse clicks.
To facilitate adaption of the system, Commonwealth provides approximately 65 model templates for advisors. Some of these are allocation templates created by Ibbotson, others were created by Commonwealth. Commonwealth also provides other model templates for their PPS Select wrap program that provide asset selection as well as asset allocation.
Advisors who prefer models of their own design can create models from scratch, or they can create models by editing the existing templates and saving them as a new template. Advisors can order the asset categories within a model simply by dragging and dropping them into the appropriate space. Drift variance bands and minimum trade amounts can be set at the model level, and advisors can assign an unlimited number of accounts to a model.
"Our philosophy is to offer a simplified, streamlined approach which minimizes complexity while providing the functionality our advisors require. We did not believe that we could realize our goals with a third-party solution, so we decided to build our own," said Darren Tedesco, managing principal of Innovation and Strategy. "We place a heavy emphasis on two areas: integration and ease of use."
Commonwealth Model Management delivers in those areas. The new system is fully integrated with Client360, Commonwealth's client management platform. "The system is integrated with our centralized alerting system, allowing advisors to proactively monitor model portfolios so that they can react to drift movement quickly, potentially reducing risk for their clients and systematically approaching a buy-low, sell-high methodology," said Tedesco. "They can also create cash buffer alerts."
Tedesco cited numerous other advantages of the tight integration that Commonwealth provides. For example, there are no account imports for advisors to worry about. Everything gets done automatically. Because the system is integrated, advisors can be alerted to the fact that systematic withdrawals or deposits are due when an advisor begins a rebalance. Unlike many third-party systems, Commonwealth's system allows advisors to generate cash within the rebalancing system without the need to log on separately to the operations system. Since the Commonwealth platform already is integrated with Morningstar, advisors can use of Morningstar's categorizations if they wish, or they can over-ride them with their own.
Model Management allows advisors to create product equivalences to help reduce unnecessary trades/ticket charges and to reduce the number of models that advisors need to create. This is particularly helpful when a fund within a model is closed to new investors or when clients have low cost basis equities that they are hesitant to sell.
"One final thing I should point out is that we are providing Commonwealth Model Management to our advisors at no extra charge," said Tedesco. "We think it is competitive as a standalone product, but as an integrated part of Client360, we think it offers significant additional value to our clients."