Model Portfolio & SMA Strategists Showcase - Flipbook - Page 42
SMAs & MODEL PORTFOLIOS
never really stock picking. It was
always judgment about risk, about
goals, about what a specific client’s
whole financial life requires. Portfolio
construction was simply the most
visible expression of that judgment
for most of the industry’s history. It
no longer is. What’s left, and what
actually requires an advisor rather
than a platform, is the judgment about
which structure, which strategy, which
risk budget fits this client’s actual
situation, plus everything adjacent to
the portfolio that a model can’t touch.
Client Communication & the
Advisor’s New Role
Every chapter in this guide has
assumed a decision an advisor
makes about structure, strategy, and
provider. This chapter is about the
conversation that comes after those
decisions are made, the one where
a client needs to understand why
their advisor isn’t personally picking
every stock in their portfolio anymore,
without concluding that their advisor
has stopped adding value.
THE REPOSITIONING PROBLEM
Outsourcing portfolio construction
changes what an advisor visibly
does, and visible activity has always
been an easy, if flawed, proxy for
perceived value. A client who’s used
to hearing about specific trades,
specific stock picks, specific market
calls can experience the shift to
model portfolios or SMAs as a step
down. The risk isn’t that outsourcing
is a bad decision. It’s that a badly
explained outsourcing decision reads
as abdication.
The reframe that actually works
is specific. The advisor’s job was
ADVISOR LENS
The line that does the
most work
“My job was never really stock picking.
It was judgment. I’m changing how the
picking gets done, not who’s making
the decisions that matter.” Said plainly,
before the client asks, this single line
prevents most of the “why aren’t you
managing my money” conversations from
turning adversarial.
42
PUTTING A NUMBER
ON THE VALUE
The reframe discussed above is a
qualitative argument, and qualitative
arguments are easy for an anxious
or fee-conscious client to wave
away. It helps to have a quantified
version in reserve. Research in the
same tradition as Vanguard’s wellknown “Advisor’s Alpha” studies and
Russell Investments’ own “Value
of an Advisor” (Source: Russell
Investments’ 2026 Value of an
Advisory Study) program breaks the
advisor relationship into discrete,
separately measurable components,
including behavioral coaching, taxloss harvesting, rebalancing discipline,
custom planning, and asset allocation.
It also estimates the annual value each
element adds, typically expressed in
basis points.
Behavioral coaching tends to be
the single largest component in
these studies, often estimated to
add more value over time than any
single investment decision, precisely
because the biggest threat to
most portfolios isn’t a bad security
selection, it’s an investor who sells
at the bottom or chases a rally at the
top. Tax management and disciplined
rebalancing are usually the nextlargest, both of which are exactly what
a managed account structure is built
