Model Portfolio & SMA Strategists Showcase - Flipbook - Page 5
SMAs & MODEL PORTFOLIOS
20 minutes with a brokerage app. If an
advisor’s value proposition still sounds
like “I’ll build you a diversified portfolio,”
that value proposition has a self-service
competitor now, and it’s free.
The second is the self-directed investor’s
rising sophistication. Retail platforms
now offer fractional shares, tax-loss
harvesting robo-tools, and screening
that used to require a Bloomberg
terminal. The client sitting across the
desk has better tools at home than
most advisory practices had 10 years
ago. That doesn’t eliminate the need for
advice, but it can raise the bar for what
“advice” has to mean and does eliminate
the value of generic allocation work.
The Outsourcing Decision
E
very advisor already knows the
punch line before they hear the
pitch: Outsourcing investment
management frees up time for the
client-facing work that actually grows
a practice. What’s harder to find is the
honest version of that argument, the one
that doesn’t lean on a single flattering
statistic and call it a business case.
Start with where the time goes. Survey
data on advisor workweeks has
shown a consistent pattern for years:
Somewhere around 30% of hours go
to direct client activity, another 30%
to investment management, and the
remainder splinters across business
development, administration, and
professional development. That 30%
figure for investment management
sounds reasonable in isolation. It stops
sounding reasonable once you break
down what’s inside it: fund screening,
manager due diligence, rebalancing
calendars, tax-loss harvesting windows,
drift monitoring, and the annual (at
minimum) review cycle needed to keep
a book of individually selected mutual
funds and ETFs from going stale.
None of that is client-facing. All of it
is necessary. And almost none of it
scales with the size of the practice.
A 200-household book and a
20-household book both require
essentially the same due diligence
discipline per model.
That’s the argument for model portfolios
and SMAs. Not that advisors are bad
at picking investments but that portfolio
construction and portfolio maintenance
are fundamentally different skills from
the ones that build a practice. The
first is a research-and-monitoring
discipline. The second is a trust-andcommunication discipline. Very few
advisors are equally exceptional at both,
and even fewer want to spend their
limited hours on the one that doesn’t
involve talking to a client.
WHY THIS SHIFT IS HAPPENING
NOW, SPECIFICALLY
Three forces have converged over
the past several years to make this
decision live rather than theoretical.
The first is fee compression on the
product side. Index ETFs commoditized
beta to the point where “I can get you
diversified market exposure” stopped
being a differentiator sometime around
the mid-2010s. A client who wants
plain market exposure can build it in
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The third is the maturation of the
outsourcing infrastructure. Model
portfolio delivery, TAMPs, and SMA
sleeve architecture are materially better
at solving the operational problems
(rebalancing, tax management,
reporting) that used to make
outsourcing feel like a loss of control. A
decade ago, “outsourcing your portfolio
construction” meant handing a client’s
account to a black box and hoping
the quarterly statement made sense.
Today, it can mean retaining visibility
BY THE NUMBERS
Where an advisor’s
week actually goes
Investment management: 20% of a
typical week.
Direct client activity: 35%.
The remainder splinters across business
development, administration, and
professional development. That 20%
investment-management figure is the
one worth sitting with. It’s the same
whether a practice serves 20 households
or 200, because due diligence discipline
doesn’t scale down.
