Rep-as-Portfolio-Manager Programs’ Assets Surge

Since the 2008 market collapse, big wirehouses and regional and independent broker-dealers have aggressively built rep-as-portfolio-manager platforms, according to a new report by Cerulli Associates.

These platforms consolidate multiple investment vehicles into a single account, thus streamlining the client experience and allowing the representative to generate simplified fee-based pricing.

Cerulli reported that RPM programs have enjoyed rapid growth, with net flows rising from $15 billion in 2008 to $92 billion in 2014.

“Since the 2008 market collapse, advisors who may have previously outsourced portfolio management to home-office consulting groups are reasserting control of client accounts, which permits them to more nimbly respond to their customers’ changing risk profiles in a volatile market,” Tom O’Shea, an associate director at Cerulli, said in a statement.

Some 67% of advisors surveyed by Cerulli cited “flexibility and control” as their chief reason for using RPM platforms.

And 59% of advisors planned to increase their use of managed account platforms that give them discretion of their clients’ allocation to mutual funds, exchange-traded funds and stocks.

O’Shea said asset managers were having to rethink their distribution strategies because of the changing landscape of investment discretion brought about by by the growth of RPM programs.

Money managers will have to focus on sophisticated decision-makers at individual advisory practices.

“Most BD firms offer their advisors two levels of discretion on an RPM platform: full and partial,” he said.