Hybrid portfolio approach hits sweet spot

As client expectations continue to drive a hyper-personalized approach to finance, Steve Osterink Jr, chief investment officer at Advisory Alpha has tailored his strategy to meet demand.

“A lot of firms end up either hovering on one side of the spectrum, where they're building totally custom portfolios for clients. [Or] I've seen a lot of other firms hover on the totally opposite end of that spectrum, where everything's model driven.”

At Advisory Alpha, they’ve carved out a middle path, employing a hybrid approach that leverages both custom portfolios and model-driven strategies. In practical terms, this involves the creation of model portfolios that serve as foundational building blocks. These models are curated to meet a variety of financial goals and then customized further to suit individual client needs.

"We have a process that we go through where we're selecting multiple strategies together as kind of building blocks for each client household around their goals and needs and objectives," adds Osterink.

Risk management is another critical component of Osterink’s approach. Speaking to IN, he emphasizes the importance of adapting to evolving markets and the changing landscape of investment opportunities.

"The markets evolve, you know, and have evolved. And so the stance on ‘what asset classes make sense today? Traditional or alternative?’ - that may change in the future, and it's changed in the past. We are believers in transparency, so we're looking at transparent vehicles to deliver those asset classes, such as exchange-traded funds, primarily." 

This commitment to transparency is coupled with a cautious approach to innovative investment products. While Osterink acknowledges the growing popularity and potential benefits of defined outcome products, he remains selective.

“We do see a place for those types of products or strategies, but in the current environment now, with the interest rates at where they are, some of those super boring short duration fixed income is actually really exciting from a risk management standpoint." 

Osterink also stresses the importance of balancing market risk with longevity risk, particularly in an era of high inflation.

"I've seen certain types of professional advisors and clients become so risk-averse out of fear . around market volatility, where they're only looking at market risk, drawdown risk, and then they're not recognizing longevity risk," he says.

A cornerstone of Advisory Alpha's client engagement is their streamlined process for creating Investment Policy Statements (IPS). Traditional IPS processes can be "stodgy and boring, and it's institutional," according to Osterink. In contrast, his team has developed a more efficient and client-friendly approach.

"We've created a process to really make that efficient, where it is more templated, I'll say, within reason, but so that we can deliver some of the advantages of an IPS to a broader set of clients." 

And, central to this streamlined process is their proprietary Quadrant Plan™ system. This method breaks down a client’s portfolio into four components: yield, balance or diversification, growth, and preservation of capital.

"That's how we're selecting investment strategies, plugging those in and customizing that mix of strategies for clients – we’re utilizing that Quadrant Plan™ approach," Osterink explains.

Steve Osterink, Jr. CFA, CFP®, AIF® is registered with Advisory Alpha, LLC. Investment advisory services offered through Advisory Alpha, LLC, a SEC Registered Investment Advisor.

As client expectations continue to drive a hyper-personalized approach to finance, Steve Osterink Jr, chief investment officer at Advisory Alpha has tailored his strategy to meet demand.

“A lot of firms end up either hovering on one side of the spectrum, where they're building totally custom portfolios for clients. [Or] I've seen a lot of other firms hover on the totally opposite end of that spectrum, where everything's model driven.”

At Advisory Alpha, they’ve carved out a middle path, employing a hybrid approach that leverages both custom portfolios and model-driven strategies. In practical terms, this involves the creation of model portfolios that serve as foundational building blocks. These models are curated to meet a variety of financial goals and then customized further to suit individual client needs.

"We have a process that we go through where we're selecting multiple strategies together as kind of building blocks for each client household around their goals and needs and objectives," adds Osterink.

Risk management is another critical component of Osterink’s approach. Speaking to IN, he emphasizes the importance of adapting to evolving markets and the changing landscape of investment opportunities.

"The markets evolve, you know, and have evolved. And so the stance on ‘what asset classes make sense today? Traditional or alternative?’ - that may change in the future, and it's changed in the past. We are believers in transparency, so we're looking at transparent vehicles to deliver those asset classes, such as exchange-traded funds, primarily." 

This commitment to transparency is coupled with a cautious approach to innovative investment products. While Osterink acknowledges the growing popularity and potential benefits of defined outcome products, he remains selective.

“We do see a place for those types of products or strategies, but in the current environment now, with the interest rates at where they are, some of those super boring short duration fixed income is actually really exciting from a risk management standpoint." 

Osterink also stresses the importance of balancing market risk with longevity risk, particularly in an era of high inflation.

"I've seen certain types of professional advisors and clients become so risk-averse out of fear . around market volatility, where they're only looking at market risk, drawdown risk, and then they're not recognizing longevity risk," he says.

A cornerstone of Advisory Alpha's client engagement is their streamlined process for creating Investment Policy Statements (IPS). Traditional IPS processes can be "stodgy and boring, and it's institutional," according to Osterink. In contrast, his team has developed a more efficient and client-friendly approach.

"We've created a process to really make that efficient, where it is more templated, I'll say, within reason, but so that we can deliver some of the advantages of an IPS to a broader set of clients." 

And, central to this streamlined process is their proprietary Quadrant Plan™ system. This method breaks down a client’s portfolio into four components: yield, balance or diversification, growth, and preservation of capital.

"That's how we're selecting investment strategies, plugging those in and customizing that mix of strategies for clients – we’re utilizing that Quadrant Plan™ approach," Osterink explains.

Steve Osterink, Jr. CFA, CFP®, AIF® is registered with Advisory Alpha, LLC. Investment advisory services offered through Advisory Alpha, LLC, a SEC Registered Investment Advisor.