NEW YORK, June 6, 2019 /PRNewswire/ -- Model portfolio use
has surged and financial advisors view models as an essential part
of their toolkit, according to new data released today by
Broadridge Financial Solutions, Inc. (NYSE: BR), a global
Fintech leader and part of the S&P 500® Index. As financial
advisors face more diverse competition and technology allows for
more easily designed and managed models, assets under advisement
are shifting to model portfolios, largely as a solution for
business growth, prospecting and client retention.
Survey results show that financial advisors rely heavily on
model portfolios as their businesses become more complex.
Eighty-five percent of financial advisors currently use model
portfolios, with 70% combining models with custom portfolio design.
Further, respondents report that more than half of advised assets
(54%) are in model portfolios and expect that figure to grow to 58%
over the next two years.
For FAs, Models Seen as an Effective Solution to Industry
Challenges
Business scalability is a main driver of model portfolio
adoption or consideration, according to 65% of financial advisors
using them and 35% of those not using them. Other top reasons
financial advisors use models include leveraging investment
management experts (50%), focusing efforts on client building and
retention (47%), and better addressing compliance and regulation
(36%).
Seventy-eight percent of financial advisors believe that their
clients care more about planning, service and support than
outperforming the market, and 83% agree that model portfolios are
essential to allowing more time for financial planning.
"By shifting assets to model portfolios, financial advisors are
acknowledging that they aren't just being asked to provide
investment management expertise – they need to prioritize holistic
financial planning and client service," said Matthew Schiffman, Principal at Broadridge
Financial Solutions. "A focus solely on investment management
limits the growth of an advisor's book of business. As advisors
find the right balance between custom and model portfolios for
their practice, we foresee more assets flowing into models,
particularly if usage expands among higher AUM accounts."
Financial advisors continue to believe that model portfolios are
more appropriate for smaller portfolios, with 73% viewing them as
the preferred approach for client portfolios under $500,000. Meanwhile, 46% prefer models for
portfolios under $1 million and 31%
prefer models for portfolios over $1
million.
"Lazy" Advisors and Lingering Concerns
Concerns about model portfolio usage remain, particularly among
the 15% of respondents not using model portfolios to any degree. Of
that group, 69% state they will definitely or probably not begin to
use models in the next two years; 59% view managing money as part
of their value-add for clients and 51% believe that their clients
are expressly paying for customized solutions.
Other concerns resonated more broadly among those surveyed.
Fifty-one percent believe that model portfolio usage makes it
harder to differentiate versus robo-advisors, 46% believe that
model portfolios are not as effective in down or highly volatile
markets, 45% believe model portfolios make it harder to assess
risk, and 35% believe that clients will view them as lazy for using
models.
Amid Change, a Need for Asset Manager Expertise
Emerges
Advisors are more likely to have increased rather than reduced
their reliance on asset managers over the past three years – an
increase of 50% among those using models and an increase of 31% of
those not using models. Top reasons for increased use of asset
manager resources include scalability, growth and efficiency (23%),
better understanding a manager's strategies to make informed
decisions (16%), and providing more professional expertise and
guidance on investments and the market (16%).
Likewise, asset managers are the most likely resource for
advisors constructing or rebalancing portfolios managed in-house.
Among those using models, 74% leverage asset manager support,
followed by Morningstar (65%) and in-house proprietary tools (55%).
External communications from asset managers are also seen as
valuable, with 86% of advisors finding website resources helpful,
followed by email correspondence (81%), whitepapers (79%), and
webinars and conference calls (70%).
"The surge of interest in model portfolios reveals a renewed
purpose for asset managers," said Schiffman. "From a product and
distribution perspective, asset managers need to explore placing
more of their funds into model portfolios to meet demand, as well
as consider creating more sophisticated products to attract
higher-end investors. From a marketing and sales perspective, asset
managers need to arm their wholesalers with specialist knowledge
and constantly promote digital content that assuages advisor – and
ultimately investor – concerns."
To download a summary of the survey results, click here.
Methodology
This quantitative and qualitative survey of 500 financial
advisors was fielded from March 21,
2019 through April 5, 2019 by
Broadridge Financial Solutions. For further details on survey
methodology, please contact a Broadridge media representative.
About Broadridge
Broadridge Financial Solutions, Inc. (NYSE: BR) a $4 billion global fintech leader and a member of
the S&P 500, is a leading provider of investor communications
and technology-driven solutions to banks, broker-dealers, asset
managers and corporate issuers globally. Broadridge's investor
communications, securities processing and managed services
solutions help clients reduce their capital investments in
operations infrastructure, allowing them to increase their focus on
core business activities. With over 50 years of experience,
Broadridge's infrastructure underpins proxy voting services for
over 50 percent of public companies and mutual funds globally, and
processes on average more than US $5
trillion in fixed income and equity trades per day.
Broadridge employs over 10,000 full-time associates in 18
countries.
For more information about Broadridge, please
visit www.broadridge.com.
Media Contacts:
Matthew Luongo
Prosek Partners
+1 646-396-0966
mluongo@prosek.com
Linda Namias
Broadridge Financial Solutions
+1 631-254-77711
Linda.Namias@broadridge.com
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SOURCE Broadridge Financial Solutions, Inc.