Model portfolio use on the rise
Advisers are turning to model portfolios to address their compliance concerns, rising costs and their clients’ appetite for thematic and sustainable investing, according to BlackRock.
Speaking at a BlackRock iShares ETF media briefing, Chantal Giles, Australasia head of iShares wealth, said advisers were adopting model portfolios because of their desire to achieve economies of scale.
“It allows advisers to differentiate with their clients on things like client service… rather than just spending a huge amount of time on the investment outcomes,” Giles said.
“The key advantage of ETFs in the model portfolios is that they're efficient, they're transparent, and they're typically cost efficient.”
According to IMAP’s state of managed account report, 14% of managed account assets under management were invested into ETFs.
Model portfolios allowed advisers to save time when rebalancing investments for clients as it could be undertaken across various clients with separate investment needs, at the same time, according to Giles, though advisers could still tailor model portfolios to their client’s investment thesis.
She said it was incredible to see an increased amount of advisers who would consider themselves “investment guys” – those least likely to want to adopt model portfolios - approach BlackRock to learn about model portfolios.
Giles said it was becoming too difficult for some advisers to adhere to compliance duties when they needed to rebalance all their client’s investments individually.
“They’re actually coming to us now and saying we need efficiencies – we need it from a compliance and best interest duty as well,” she said.
“We’ve got to start at client A and get to client Z and every single one of those clients has a different outcome.”
Giles said more advisers were approaching BlackRock looking for affordable solutions to satiate their client’s appetite for sustainability and specific thematics which were answered by model portfolios.
Recommended for you
It can be extremely hard to realise the gains from financial advice M&A, according to Peloton Partners’ Rob Jones, and more could be gained from firms looking inward at their own practice.
With platforms reporting their quarterly results, there is a clear divide in the adviser markets they are targeting, according to platform specialist Recep Peker, and which would be right for your clients.
The Federal Court has imposed a $10 million penalty on Macquarie Bank for failing to prevent and control unauthorised fee transactions by third parties including financial advisers.
A financial advice firm has seen a weekly decline of 10 advisers, with all moving to a new licensee, while Centrepoint Alliance continues its “growth story”.
