How model portfolios help advisors improve the client experience

Here’s a look at the four primary ways in which model portfolios can benefit an advisory firm’s growth goals.

Achieving your advisory firm’s growth goals is directly tied to your ability to attract and retain clients. Ultimately, the long-term success of your firm depends on your ability to align with your client’s needs and expectations. All too often, what an advisor assumes their client values most is not, in fact, the case.

Advisors should be asking themselves, “What do clients value most about our working relationship?” Focusing on the client experience is key to success.

FOCUS ON INVESTOR PRIORITIES

What clients value the most, according to research by WisdomTree is financial advice.

This may not be all that surprising, as developing a one-on-one, human relationship with a trusted financial professional is something that cannot be replicated by software or robo counterparts.

Rather than achieving the highest possible returns, investors are primarily concerned with reaching their personal goals and working with an advisor they trust to help them make the right financial and investment decisions.

The misalignment between advisor and client priorities is evident in how advisors choose to spend their time. Rather than spending more time working closely with clients, advisors report focusing much of their efforts on portfolio management.

HOW MODEL PORTFOLIOS HELP FIRMS GROW

Advisors must build a business focused on delivering personal advice that touches on all aspects of a client’s financial life — not just personal investment recommendations.

How? By streamlining the portfolio management process without sacrificing client trust or portfolio performance. An effective way to do this is to embrace model portfolios and the benefits they can bring to your firm and your clients.

Here’s a brief look into the four primary ways in which model portfolios can benefit an advisory firm’s growth goals.

1. MODEL PORTFOLIOS FOSTER MORE EFFICIENT RELATIONSHIPS

Using model portfolios in your firm frees up more of your time to focus on what clients value most: excellent service and meaningful relationships. While performance is important to investors, it’s the reassurance and guidance provided along the way that helps them feel good about their decision to work with you.

According to a BlackRock report, implementing model portfolios can help advisors spend up to 20% more time working one-on-one with clients. Rather than adding more hours to the workweek, it’s possible to find meaningful ways to refocus your efforts and improve the client experience.

2. MODEL PORTFOLIOS OFFER CONSISTENT ANALYTICS

The key to scaling your firm is to standardize practices wherever possible without sacrificing the client experience. Model portfolios help advisors better analyze the degree to which investments are performing while ensuring a standardized and equitable experience for all clients.

3. MODEL PORTFOLIOS IMPROVE RELIABILITY

Advisors who implement model portfolios into their practice can take full advantage of the robust institutional resources that go into developing these third-party portfolios. As a result, advisors can spend less time and effort on portfolio management, while still offering clients more consistent outcomes.

That being said, advisors are best served when they utilize a platform that allows them to both take advantage of institutional, third-party models and also develop their own models — or use customized, blended strategies.

4. MODEL PORTFOLIOS PROVIDE BLENDED STRATEGIES TO IMPROVE CUSTOMIZATION

Using a model portfolio doesn’t limit you from customizing your approach. In fact, it can help improve the tactical decisions you need to make when working with clients. With blended strategies, for example, you have the ability to manage a fixed-income and emerging markets focus within one portfolio.

I don’t want to diminish the importance of portfolio management — portfolio construction and management are still invaluable components of an advisor’s job. But at its core, the job of an advisor is to provide financial advice and help clients reach their financial and life goals. This involves some level of customization, as all clients are different. Using models does not have to mean losing customization — it can simply be a more efficient way of providing a customized approach.

WHAT DO CLIENTS THINK OF MODEL PORTFOLIOS?

As shared in our white paper that drills deeper into the benefits of implementing model portfolios into your practice, WisdomTree’s research shows that investors actually prefer model portfolios and are more likely to work with an advisor who uses third-party models. By comparison, only 10% of investors surveyed feel opposed to their advisor using a model portfolio.

Why do clients tend to prefer model portfolios? It’s likely because model portfolios are well-researched and rely on the oversight of professional money managers. Not only does this reliability help improve a client’s trust that their portfolio will achieve favorable returns, but it increases an advisor’s credibility as well.

HOW TECH PLATFORMS AND MODEL MARKETPLACES HELP

Running model portfolios is best done using a software platform specifically designed to provide the analytics, customizability and access to make model selection and maintenance easy.

A good platform will provide advisors with a simple user interface, along with powerful proposal and analysis tools. The right technology will allow advisors to seamlessly implement their favorite investment strategies and scale business with ease by incorporating a robust portfolio solutions platform into the firm’s tech stack.

In addition, a model marketplace that brings industry-leading strategists together in one place so advisors can do their research, make a decision, and then move on with getting to the real work of assigning a model to a specific client account is another great time-saving tool.

Platforms provide portfolio analytics, proposal generation, stress testing and access to a model marketplace. With the right tools, advisors can increase efficiency and streamline portfolio management efforts while maximizing and elevating the client experience.

Josh Schwaber is head of customer experience at Kwanti, a portfolio analytics solution aiding financial advisors and investment managers with model management, prospect conversion, client retention and more.