Thought Leadership

Model Portfolio Users Reveal Benefits of Partnering With External Providers

January 14, 2025

While managed account assets are growing year-over-year, advisors’ reliance on model portfolios is increasing more slowly than anticipated. Meanwhile, advisors expect to increase their reliance on SMAs, and use of direct indexing is up from last year as personalization and tax efficiency continue to be important factors when serving high-net-worth clients. But there are ways for providers to expand distribution of their model portfolios.

To start, providers must convince advisors of the benefits of partnering with external providers. According to Cogent Syndicated’s Advisor Use of Model Portfolios and SMAs report, improving portfolio management efficiency and spending more time prospecting for new clients are the most compelling potential benefits identified by current model portfolio users. Eight in ten users agree that third-party model portfolios help them improve portfolio management efficiency, while nearly seven in ten agree that these models help them spend more time prospecting and acquiring new clients. Meanwhile, the ability to help lower operating costs is least convincing, with only one in five advisors saying they disagree and fewer than half agreeing.

The potential to improve portfolio management efficiency is recognized as the leading benefit among advisors working in the broker/dealer channels and RIAs as well as among advisors managing both larger and smaller books of business. Meanwhile, the ability to grow their business follows close behind as a leading benefit among advisors managing at least $100 million in assets (at 78% compared with 69% overall). Advisors 65 and older express relatively lower levels of agreement with the benefits of using model portfolios compared with their younger peers, particularly in terms of believing that model portfolios help them to retain clients, with just 39% agreeing compared with 57% overall.

To overcome these concerns, providers should emphasize support services available to advisors including portfolio construction services and client-ready materials. Highlighting the variety in investment options, low fees and strong performance are also important factors, with some advisors identifying these as areas for improvement.

Advisor Use of Model Portfolios and SMAs uncovers ways to better support the use of model portfolios for affluent clients and reveals which providers are succeeding in meeting the needs of advisors. For more information about the full report, click below.

 

Rice Meredith
Meredith Lloyd Rice
Vice President, Cogent Syndicated

Meredith Lloyd Rice is a vice president in Escalent's Cogent Syndicated division. She manages the firm’s syndicated research products focused on the financial advisor market and is the lead author of the Advisor Brandscape® report. She has more than 15 years of experience managing research initiatives in the wealth management industry and has explored a wide range of business issues on the client and supplier side. Prior to joining Escalent, Meredith was an associate VP at Chatham Partners where she oversaw a team of researchers and managed the overall design, analysis and interpretation of large-scale studies for institutional financial services clients. Meredith earned an MBA from Thunderbird School of Global Management and a bachelor’s degree from Colgate University. She is a former collegiate rower who now gets her exercise chasing after her daughter and Clumber Spaniel.