There are several ways advisors can maximize efficiency and lay the groundwork for ongoing, scalable growth.
First, advisors should consider whether there is a better or different way to optimize their portfolio management approach. Advisors have a range of options to scalably create client-centric portfolio solutions to achieve desired outcomes, while possibly also freeing up time to spend on other activities such as meeting with those clients or cultivating prospects. These ideas include:
1. Leverage Home Office or Third-Party Asset Allocation Models: Traditionally, advisor-driven portfolios have been thought of as more personalized and better-managed, with a perception that they are better able to meet every client’s individual needs. Building a client’s portfolio from third-party asset managers was historically considered a less-customizable solution. However, advances in technology have challenged these assumptions and created a happy medium between the two options, enabling advisors to efficiently create customized solutions for clients by personalizing models, or blending models from home-office and third-party managers with their own investment ideas, in a highly scalable way.
Best-in-class external managers are available via manager marketplaces integrated with technology providers. Leveraging the institutional investment research available from these managers can serve as reliable way to outsource some individual security/fund due diligence, asset selection, and portfolio construction. The adoption of powerful portfolio management and trading technology solutions can enable advisors to scalably customize, and efficiently and effectively monitor and manage, these combinations in client portfolios.
2. Give Clients Greater Access to SMA Managers via Unified Managed Accounts: Separately managed accounts (SMAs) enable advisors to offer clients access to multiple investment products and strategies for clients in a tax-efficient portfolio. However, the process of setting up SMAs has historically been complex and time-consuming—advisors were required to open separate custodial accounts for each strategy, and clients were required to sign individual agreements with each manager, making any rebalancing or other changes to the SMA very cumbersome.
Industry innovations have provided a more integrated, scalable approach for advisors—unified managed accounts (UMAs) which allow clients to access multiple investment products and strategies, along with exchange-traded funds (ETFs) and advisor-managed sleeves, in a single portfolio without having to open multiple accounts. This saves the advisor and client from having to sign and process multiple sets of account paperwork, and it also typically enables advisors to access institutional-caliber managers at much lower minimum account sizes. The UMA structure is much more efficient to manage, trade, and rebalance, and allows for scalable customization and tax management for clients on an ongoing basis. UMAs also streamline and simplify reporting.
For advisors not affiliated with a broker-dealer or bank, access to institutional-quality strategies from third-party managers is available through independent online marketplaces. Such a partner should be objective—without affiliations to custodians or fund managers—while providing an expansive and cost-effective suite of investment products and strategies for advisors to mix and match in client portfolios.
3. Outsource Trading And Overlay Portfolio Management: Consider outsourcing trading and overlay portfolio management to a third party, whether implementing simple advisor-driven or home office models, a blend of these and third-party models, or utilizing a UMA structure to access multiple SMA managers. A turnkey outsourced model implementation service can handle the trading, rebalancing, tax harvesting, and account administration on an entire book of business, all done in a tax-aware manner for taxable accounts. This can be a big time-saver for advisors who want to refocus resources on other activities.
4. Utilize Innovative Portfolio Accounting And Trading Technology: Implementing the right portfolio accounting and trading technology platform is critical to the success and efficiency in any investment management process. Like with any solution, advisors need to conduct thorough due diligence to find the right technology platform to fit their business. Each advisor will have his or her own specific list, but some of the key considerations and differentiators in an ideal platform can include:
• Ability to scalably create and manage custom portfolios