Model Portfolio & SMA Strategists Showcase - Flipbook - Page 51
SMAs & MODEL PORTFOLIOS
Case Study 3: The
Accumulating Professional
The situation. A 34-year-old physician
with $340,000 across a taxable
brokerage account and a 401(k), high
income, high savings rate, minimal
patience for investment complexity, and
a stated preference for keeping costs
as low as possible. No concentrated
positions, no complex tax situation,
no immediate liquidity needs. Just a
straightforward accumulation problem
for someone who wants to set it up
correctly once and not think about it
again for a decade.
Segmentation. This is close to the
textbook case for a model-only or
lightweight UMA structure rather than
anything more complex. The posture
question discussed earlier resolves
quickly here (p. 44). This is a client who
wants to delegate completely, not one
who wants to stay hands-on, and the
segmentation is simple because there’s
a single clear mandate, long-term,
low-cost, tax-efficient growth, with no
competing priorities to balance against it.
Structure and strategy. A core,
factor-tilted equity model, delivered
through a model marketplace rather
than a stand-alone SMA, fits both the
cost sensitivity and the simplicity of
the mandate. Given the account size
sits right at typical SMA minimums
but well below the level where direct
indexing’s tax benefits clearly outweigh
its added complexity and cost, a wellconstructed ETF-based model is the
more defensible recommendation here
than direct indexing, notwithstanding
this guide’s general enthusiasm for
the latter. The account-minimum
discussion covered earlier argues
against defaulting to direct indexing
just because it’s available (p. 35).
The due-diligence process here is
simpler than Case Study 1’s, but
not absent. Even a low-cost modelonly strategy deserves the four-leg
framework, run at appropriate depth
for the stakes involved: confirming the
provider’s process is genuinely rulesbased and repeatable, checking the
full fee stack including the marketplace
platform fee, and confirming rebalancing
happens on a schedule the client
doesn’t need to monitor personally,
since the drift-risk warning discussed
earlier applies with particular force to
Case Study 4: The Retiring
Business Owner
The situation. A 61-year-old business
owner just sold her company for
$6 million, has never worked with a
sophisticated advisor before, needs
to begin drawing $180,000 a year in
retirement income starting immediately,
and, because the company had a
small retirement plan for its dozen
employees, is also winding down her
role as a plan fiduciary and needs
guidance on a responsible transition for
those participants.
Segmentation. Two entirely distinct
mandates live in this one relationship:
her personal $6 million, now needing
to generate immediate retirement
income, and her outgoing fiduciary
responsibility to a dozen departing
employees’ retirement plan. These
need to be evaluated on completely
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a client who explicitly doesn’t want to
think about this account (p. 17).
The behavioral dimension. This
client hasn’t experienced a serious
market downturn as an investor yet.
His accumulation phase began during
a long bull run. The most valuable thing
an advisor can do here isn’t a strategy
decision at all. It’s pre-loading the
Cycle of Investor Emotions framework
discussed earlier (p. 43) before he
ever needs it, so that the first serious
drawdown is met with “this is the
normal panic phase, and historically
the point where selling does the most
damage” rather than a panicked call
that undoes a decade of disciplined
accumulation in one bad week.
The client conversation. Short, direct,
and focused on cost transparency
specifically. This is a client who will
actually run the fee-stack math himself if
given the chance, so the advisor should
present it first, unprompted, exactly the
disclosure discipline argued for earlier
(p. 43). The “why not just do this myself”
objection is likely to come up given
his general self-sufficiency, and the
honest answer from the second script
in Appendix B, framed around time, not
superior stock-picking, tends to land
well with exactly this kind of client.
different frameworks, the personalasset framework discussed across
several earlier chapters for her personal
assets, and the retirement-plans
chapter for the plan-sponsor obligation
(p. 39). Conflating them would
shortchange both.
Personal assets: structure and
strategy. With an immediate income
need this large relative to the asset
base, the tax-smart decumulation
logic discussed earlier is central from
day one, not a future consideration
(p. 38). A UMA structure combining a
