Model portfolios in focus as firms prioritize client experience

Survey finds fund selectors are expanding model offerings with specialized non-core components

Model portfolios in focus as firms prioritize client experience

With increased interest and more particular demands coming in from financial advisory firms, providers of model portfolios are anticipating a lot of work in the year ahead.

In a global survey of 400 professional fund selectors – including chief investment officers, directors and investment team members at independent financial advisor firms, and family officers, among others – Natixis Investment Managers found that expectations are high that more assets will go into model portfolios amid strong interest and expanding options.

“The attractiveness of model portfolios reflects a heightened, industry-wide focus on the client experience and an evolving advisory business model that emphasizes the value of personalized planning and advice, including and beyond investment performance,” said Dave Goodsell, executive director of Natixis’ Center for Investor Insight.

Among respondents in the U.S. and Canada, 84% said they currently offer model portfolios, with 52% identifying moving a greater share of client assets into models as a key objective for the year ahead. When asked to list benefits of using model portfolios, 60% said they provide a more consistent investment experience for clients across the firm, and 41% said that by freeing up time spent on stock selection, they empower advisors to better address clients’ needs.

Only one fifth (19%) of fund selectors reported challenges persuading financial advisors that model portfolios would be helpful to manage at least part of their clients’ assets. The most cited challenges were providing customization options within their model portfolio offering (45) and knowing when to add new or enhanced models (39%)

Specialty models are set to form a bigger part of fund selectors’ agenda, with 60% citing a greater need for them. Over the next 12 to 24 months, 54% said they plan to add ESG-focused models to their platform, with almost two thirds (64%) sharing the view that implementing ESG across portfolios is easier with models. Other planned enhancements to model portfolio offerings include ones with thematic sleeves focused on longevity, disruptive technology, and other areas (45%); portfolios with alternative investments (36%); and tax-aware models (32%).

Given the resilience demonstrated by private equity investments during the pandemic, 62% of fund selectors believed demand for the asset class will rise in the coming year. As half of respondents expect private assets to feature more prominently in portfolios, many are planning to increase their exposure to private asset funds including private equity (48%), private debt (46%), infrastructure (45%), and real estate (45%).

“Models make sense, both from a firm brand perspective and for advisors managing the growth of their practice in a market that’s increasingly complex to navigate,” Goodsell said.


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