Holistic views of a household’s investment picture, across custodians, asset allocations, styles, product types and platforms—are enabling leading-edge advisors to view and manage more of their client's’ assets.
Advisors who have 20-20 vision across a client’s entire household can compare performance of assets held away vs. assets under their management, see the gaps and manage accounts across the entire household. This can help advisors deepen the relationships with clients as well as grow their asset base.
It’s an evolution from “product solutions to advisory solutions,” says Andrew Clipper (left), director of Investor Services, Citi Markets & Banking. This may be especially important as registered reps move from a transaction and product-suitability orientation to an advisory orientation.
As financial reforms progress, there is the real possibility of a requirement for fiduciary advice. Seeing an investor’s full picture—all of the assets across the household—can be an enormous help there, and not just for “reps as advisor” or “rep as portfolio manager,” according to Clipper, but for compliance purposes, he says.
Dr. Jonathan Tiemann, founder and president of Tiemann Investment Advisors, and Matthew Radgowski (left), vice president of Wilshire Associates joined Clipper for a webcast on Tuesday to discuss trends in how advisors are using data aggregation to help grow assets under advisement. This editor moderated the panel.
The trends they see are changing the way financial advisors interact with their customers or clients.
- Portfolio optimization and personalization
- Tax optimization
- Cost control
- Rebalancing across the household
- Asset location to optimize and deliver cash flow/income
- Movement from unified managed accounts to model portfolios
- Migration to independent financial advisor status
- Alternative investments
- Principal protection
- Hedging strategies
- Risk management across accounts
Using Data Aggregation in Practice
In large part, viewing the household holistically is about being able to create an “overarching portfolio strategy,” for a household. “Suppose you have a client that inherited a large position in IBM with a low cost basis,” proposes Tiemann. An advisor may not want to sell it all at once because the client would realize a giant capital gain. But if an advisor can see a client’s entire household portfolio, they can provide “tax optimization, wealth harvesting, deferring gains,” by matching sales of the appreciated position with losses.
Tieman, who has a PhD in finance from Yale, notes that the technology to do this is available now, as is the ability to optimize portfolios, locate assets in the most advantageous accounts, personalize portfolios and control costs.
“Managing risk across accounts,” is a trend that Radgowskiis seeing. “The ability to see and design and deliver strategies without product constraints and execute trades in a tax optimized fashion allows advisors to better implement investment solutions.”
Using data aggregation can also help advisors bring more assets—even those that are “held away”—under their control. Clipper sees advisors moving from product “silos” within “individual accounts” to “multi-asset solutions that include income and alternatives.”
See the Household Data in Realtime
The technology for being able to see the holistic asset picture for a household is available now in Citi’s OpenWealth unified managed household platform, says Clipper. One key element—that had not been available before—is seeing aggregated data in realtime across the household’s accounts, including those held in-house and away, at different custodial or clearing platforms. This is something that’s critically important to an advisor’s ability to “address weaknesses and propose alternatives to investor’s current choices,” Clipper explains.
“The ability to see and manage risks across accounts, design and deliver strategies without product constraints and execute trades in a tax optimized fashion allows advisors to better implement investment solutions,” according to Radgowski.
“Advisors are continually coming under increasing pressure, both regulatory and competitive, to go beyond a product sales concept of suitability and truly optimize the investment recommendations they give their customers,” Tieman says.
Rebalancing is part of this equation. Being able to see the entire investment picture—this holistic view—will be very helpful, says Tieman. Rebalancing across an entire household’s holdings is an area that had been so difficult that often it “just didn’t happen,” he explains, but advisors who have this holistic view of clients assets across households, products, allocations will able to “rebalance 1,000 accounts, in a tax and portfolio optimized way, at the touch of a button.”