Model portfolios gain ground with Aussie investors

Australian investors’ awareness and satisfaction with model portfolios has risen, highlighting benefits such as lower fees, closer portfolio monitoring, and greater adviser involvement. 

State Street Global Advisors’ (SSGA) latest Model Portfolios: Adaptive Solutions for Advisory Growth report, surveying 250 individual investors holding investable assets of more than $780,000 who are working with a financial adviser, found awareness and adoption of this investment vehicle has grown significantly over the past five years.

Model portfolios consist of a range of assets, including ETFs, stocks and bonds, providing access to professionally managed, diversified investment solutions with a focus on achieving specific financial goals.

Over two-thirds (67 per cent) of Australian investors said they are now aware of model portfolios, a notable increase from just 47 per cent in 2019, according to the survey.

Moreover, 84 per cent of investors report having assets within model portfolios, up from 56 per cent in 2019.

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“With more than half of Australian financial advisers now using managed accounts, it’s great to see the benefits are transcending to investors,” said Kathleen Gallagher, head of model portfolios for EMEA and APAC at SSGA.

The research further highlighted that Australian investors highly value the benefits that come with having their assets in model portfolios. Close to 90 per cent stated that they benefit from increased portfolio monitoring and more time spent with their financial advisers. 

Some 79 per cent said portfolio track record is a benefit, though this is down from 91 per cent in 2019.

The benefits of model portfolios extend beyond cost and time efficiency, with the survey finding investors who know they have assets in model portfolios report higher satisfaction with their financial advisers, especially regarding transparency, issue resolution, and portfolio performance optimisation. 

Tim Bradbury, head of intermediary, Australia, at SSGA, noted advisers are able to create additional efficiencies through providing model portfolios to their clients on investment.

“Advisers that use managed accounts have reported that they, or their support staff, save on average 22.8 hours per week. Model portfolios empower advisers to optimise their time, allowing them to focus on providing holistic guidance which is the most important to their clients,” he said.

“Advisers are creating additional efficiencies through providing model portfolios to their clients on investment platforms. The powerful combination of this technology, coupled with model portfolios, is a key evolution in providing investment solutions and advice cost-efficiently.”

According to the survey, Australian investors with assets in model portfolios are more likely to recognise adviser value beyond better returns and lower fees, with around 44 per cent noting the value of having more of the adviser’s time and 33 per cent pointing to more flexibility from the adviser to their needs. 

“Model portfolios are transforming the way financial advisers in Australia serve their clients,” Gallagher added.

“By leveraging ETFs as building blocks, financial advisers are now offering ready-made solutions that fully optimise portfolio management and compliance work – similar to providing the cake for investors, rather than just the ingredients. 

“This approach not only provides meaningful and efficient investment strategies, but also means financial advisers can spend more time on what matters most – building stronger client relationships.”