Model Portfolio & SMA Strategists Showcase - Flipbook - Page 45
SMAs & MODEL PORTFOLIOS
own. The more useful segmentation
asks several questions. Does this client
have a single, clear mandate or several?
Are they tax-sensitive enough to warrant
direct indexing’s added complexity?
Do they have a concentrated position
or embedded gains that require a real
transition plan? Would this client actually
be better served by a boutique singlestrategy manager, or even a bespoke
discretionary relationship, than by a
diversified model?
Building Your Model
Portfolio Stack:
The Six-Step Framework
Step 6: Build the client conversation
before, not after, implementation
Decide your
posture
Step 3: Run the due-diligence checklist
for real, on every serious candidate
The four-leg framework described
earlier (p. 22), covering manager tenure
and stability, ownership structure and
succession, a plain-language process
description, rebalancing discipline,
stated capacity limits, full stacked fees,
GIPS status, third-party ratings where
available, and performance evaluated
with real skepticism (p. 29), should
be applied consistently across every
provider under real consideration, not
selectively applied only to providers an
advisor is already inclined to distrust.
Segment clients
by need
Run due diligence
for real
Step 4: Stack the fees and do the
arithmetic before committing
This deserves its own explicit step
because it’s the single most commonly
skipped part of the process. Build
out, for each structure under real
consideration, the full stack: underlying
fund expense ratios, manager or model
fee, TAMP platform fee if applicable,
and overlay management fee if
applicable. Compare that total, not the
headline manager fee alone, against
what the client is currently paying and
against alternative structures.
Stack the fees &
do the math
Confirm platform
compatibility
Step 5: Confirm platform compatibility
before assuming it
A provider or strategy that looks right
on paper is only usable if it’s actually
accessible through the advisor’s existing
custodial and TAMP relationships.
Confirming platform compatibility
belongs early enough in the process
to avoid falling in love with a solution
that turns out to require rebuilding the
practice’s entire technology stack to
implement.
Build the client
conversation
Source: Guide synthesis
45
The communication framework
discussed earlier (p. 42) works best
when it’s prepared in advance of a
structural change, not improvised at
the moment a client notices something
different on their statement. Knowing in
advance how the shift will be explained,
what will and won’t change from the
client’s perspective, and how fees
will be disclosed transparently is part
of the implementation plan, not an
afterthought to it.
ROLLING THIS OUT ACROSS AN
EXISTING BOOK OF BUSINESS
Everything above describes the
sequence for one client. Applying it
across an entire existing practice raises
a separate question this guide hasn’t
addressed directly: in what order should
an advisor actually migrate an existing
book of business, given that doing all of
it at once is rarely realistic.
The most defensible starting point is
usually the segment where the case for
change is strongest and the transition
risk is lowest, often the clients already
holding a diversified, low-embeddedgain portfolio, where the transitionplanning concerns discussed earlier (p.
36) barely apply and the main work is
simply selecting and implementing the
right ongoing structure. Clients with
large embedded gains or concentrated
positions deserve to come later in
the sequence specifically because
they need more preparation time, not
because they’re a lower priority.
Rushing a complex transition to keep
pace with an arbitrary rollout schedule
defeats the purpose of planning it
carefully in the first place. A practical
rule of thumb is to sequence by
transition complexity, not by client size
or relationship tenure, since a large,
