The Rise of The Models

Posted by Tony Davidow, CIMA on Feb 11, 2020 10:33:17 AM
Tony Davidow, CIMA
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Davidow, Tony


"No, I’m not referring to the next Star Wars prequel – but rather a transformation in the manner in which advisors provide investment advice."

  • - Tony Davidow


While asset allocation model portfolios have been around since the early 1990s, they’ve evolved a great deal over the past couple of decades. Asset allocation model portfolios can now be total return oriented or a goals-based approach. They can represent a total portfolio solution or a specialized sleeve. They can be developed by third-party managers, affiliated managers or headquarters.

Asset Managers are now developing and introducing an array of models to Wirehouses, Custodians and TAMPs among others. The models can include mutual funds and/or ETFs providing exposure to a broad array of asset classes. Home office personnel have embraced models as they allow advisors to spend more time on broader wealth management issues – and focus on the overall client experience.

In a similar manner to the growth of the Separately Managed Account (SMAs) business in the early 1990s, asset allocation model portfolios represent a way to leverage the expertise of third-party asset managers, and better align the advisor’s interests with their clients. For asset managers, models provide a way of capitalizing on their expertise, owning a larger slice of the pie. For advisors, it allows them to align their interests with their clients and tap into the expertise of world-class asset managers. Investor gain access to a more specialized team of experts.


While many advisors believe that their value proposition is enhanced by creating portfolios, just 28% of investors believe their advisors have the highest level of investment expertise, and 35% prefer a dedicated investment team1. Investors value a team of dedicated resources, each with their area of expertise (investment management, financial planning, trust & estates, philanthropy, etc.).

The challenge for advisors is effectively pivoting especially if he or she has positioned their value proposition as building portfolios. For reps who have moved significant assets to ‘Rep-as-PM’ or ‘Rep-as-Advisor’ programs this may be a more challenging discussion. It may be appropriate to position models as a complementary solution. We’ll cover this transition and positioning in a future blog.

For advisors where the majority of their assets are transactional, Mutual Fund Wrap, Separately Managed Accounts (SMAs) or Unified Managed Accounts (UMAs) – we lay-out the benefits of migrating to model portfolios below.


Models may not be appropriate for every advisor – and every client – but they represent an evolutionary step forward for our industry. Asset managers can leverage their asset allocation and portfolio construction expertise. Advisors can spend more time and energy addressing wealth management issues, and investors gain a deeper team of experts working on their behalf.

"Like many changes over the last couple of decades, some advisors will fret that these changes represent a threat to their business model and value proposition – others will embrace these changes and evolve their practices and value propositions."

Some advisors will become commoditized – others will flourish as they pivot to focus on the broader wealth management challenges. An advisor can provide tremendous value to their clients in addressing their wealth management needs.

Change is a given. How will you respond? Will you evolve and flourish – or risk becoming obsolete?


1 Cerulli Edge, U.S. Monthly Product Trends, July 2019




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