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October 12, 2022 at 03:51 PM
The use of model portfolios can free up time advisor practices spend on portfolio management, according to a new report from Cerulli Associates. Used appropriately, they allow practices to reallocate time toward other highly valuable functions, such as delivery of financial planning services and asset gathering.
Cerulli expects the industry’s gradual and steady transition to a financial planning-oriented service model to be a powerful impetus for the adoption of model portfolios.
For example, advisor groups that create individually tailored portfolios or practice-level custom models — insourcers, according to Cerulli — could significantly reduce their time commitment by switching to model portfolios. Currently, those who create portfolios customized for each client spend 29.5% of their time on investment management, and those who utilize custom models 18.5% of their time. Model portfolio use would allow both groups to reduce that time commitment to less than 10%.
“This saved time can be put toward client-facing activities, a particularly important activity,” Cerulli associate analyst Brad Bruenell said in a statement. “For example, for younger advisors that are focused on asset gathering and building a book of business.”
