Model portfolio use on the rise
Advisers are turning to model portfolios to address their compliance concerns, rising costs and their clients’ appetite for thematic and sustainable investing, according to BlackRock.
Speaking at a BlackRock iShares ETF media briefing, Chantal Giles, Australasia head of iShares wealth, said advisers were adopting model portfolios because of their desire to achieve economies of scale.
“It allows advisers to differentiate with their clients on things like client service… rather than just spending a huge amount of time on the investment outcomes,” Giles said.
“The key advantage of ETFs in the model portfolios is that they're efficient, they're transparent, and they're typically cost efficient.”
According to IMAP’s state of managed account report, 14% of managed account assets under management were invested into ETFs.
Model portfolios allowed advisers to save time when rebalancing investments for clients as it could be undertaken across various clients with separate investment needs, at the same time, according to Giles, though advisers could still tailor model portfolios to their client’s investment thesis.
She said it was incredible to see an increased amount of advisers who would consider themselves “investment guys” – those least likely to want to adopt model portfolios - approach BlackRock to learn about model portfolios.
Giles said it was becoming too difficult for some advisers to adhere to compliance duties when they needed to rebalance all their client’s investments individually.
“They’re actually coming to us now and saying we need efficiencies – we need it from a compliance and best interest duty as well,” she said.
“We’ve got to start at client A and get to client Z and every single one of those clients has a different outcome.”
Giles said more advisers were approaching BlackRock looking for affordable solutions to satiate their client’s appetite for sustainability and specific thematics which were answered by model portfolios.
AUTHOR
Liam Cormican
Recommended for you
The big four bank is set to see $40 million per annum in cost savings as it continues to migrate customers from its Asgard wealth platform to BT Panorama by FY26.
Advice licensee WT Financial has announced a 50/50 joint venture with the Australian subsidiary of a US financial advice investor.
Wealth managers will need to reach aggressive short-term goals to grow their assets under management, according to Natixis Investment Managers, but Asia-Pacific has the lowest expectations on their future growth.
With a rising number of licensees opting for bespoke managed accounts, a panel of experts has shared what firms need to know before going down the custom route.
