NEW YORK, Oct. 14, 2019 /PRNewswire/ -- A new
report from Broadridge Financial Solutions, Inc. (NYSE:
BR), a global Fintech leader and part of the S&P 500® Index,
reveals that assets under management (AUM) for model portfolios is
approaching $3 trillion, with 35% of
those assets owned by two asset managers. The State of Model
Portfolios: Reshaping the Distribution Landscape is derived
from a proprietary algorithm developed by Broadridge.
Models Outpacing the Market
The use of model portfolios, investment solutions that group
funds together and help financial advisors spend more time with
clients, has grown nearly 19% annually since 2016, reflecting
aligned interests from investors, advisors, distributors and asset
managers. As the fastest-growing component of the intermediary-sold
product landscape, Broadridge predicts that model portfolio assets
will more than double by 2023, with advisor-led models registering
the largest gains.
Advisor-led portfolios encompass $1.4
trillion of total model portfolio AUM. As a natural entry
point for advisors, Broadridge anticipates that advisor-led models
will grow by $1.9 trillion by 2023. A
survey of 500 advisors conducted by Broadridge found that advisors
plan to rely more on model portfolios as their clients' business
needs become more complex.
"As client needs and prospecting demand more of advisors' time,
those advisors are increasingly turning toward model portfolios to
reach their business goals," said Andrew
Guillette, U.S. Distribution Insights, Broadridge. "Our
recent studies and analysis have found that advisors are largely
looking for ways to spend more time with clients on holistic
financial planning, where as in the past they spent much of their
time customizing investment solutions. As a result, we are entering
the age of models."
ETFs to Eclipse Mutual Funds in 2020
According to current Broadridge analysis, 42% of model assets
are in ETFs. Based on current data, Broadridge predicts that ETFs
will surpass mutual funds in 2020, reaching more than 50% of
overall model assets and growing at triple the rate of mutual funds
inside model portfolios.
Asset share among the top ten mutual fund managers is less
concentrated in the model space at 44% versus the broader retail
mutual fund industry at 65%. This suggests model opportunities for
well-focused competitors.
Room for Diversification in Model Asset Classes
The top 25 investment categories account for 84% of model
assets, nearly matching the total industry at 80%. While models can
allow advisors to more easily diversify across asset classes, 90%
of model assets are anchored by core equity and fixed-income
products and 28% of models are made up solely of equity and
fixed-income funds.
"Equity and bond funds remain the most popular strategies in the
model space as well as in ETF strategies. But as advisors move
upmarket and face more sophisticated client needs, we anticipate a
demand for more specialized models, including those offering
commodities, alternatives and other asset classes," said
Guillette.
The report includes over 100 charts and insight on the model
marketplace stemming from Broadridge's proprietary data as well as
conversations with industry leaders.
Methodology
Broadridge's proprietary algorithm provides transparency on
model portfolio activity across $14
trillion of directly sourced mutual fund and ETF assets.
Sample dimensions tracked include model type (home-office,
third-party, advisor-led), investment style, active-passive, and
mutual fund versus ETF. Analytics are provided at the industry,
channel, distributor and city level.
The data is complemented by survey results from 500 qualified
financial advisors on the topic of portfolio construction,
fee-based business and model portfolio attitudes and usage. These
advisors all work in wirehouse, regional, independent broker-dealer
or registered investment advisor channels, and have 50%+ of assets
with individual retail investors, more than $10 million in AUM, at least 25% of AUM in mutual
funds or ETFs and at least 25% of AUM in fee-based advisory.
In addition to data and survey results, in-depth interviews were
conducted with more than 25 key industry executives to gain
additional perspective on model usage and trends. These executives
have responsibilities that include overseeing heads of sales,
national accounts, models, product, strategy and research.
About Broadridge
Broadridge Financial Solutions, Inc. (NYSE: BR), a $4 billion global Fintech leader and a part of
the S&P 500® Index, is a leading provider of investor
communications and technology-driven solutions to banks,
broker-dealers, asset and wealth managers and corporate issuers.
With over 50 years of experience, including more than 10 years as
an independent public company, Broadridge provides an important
infrastructure that powers the financial services industry.
Broadridge's infrastructure underpins proxy voting services for
over 50 percent of public companies and mutual funds globally, and
processes on average more than U.S. $7
trillion in fixed income and equity trades per day of
securities. Broadridge employs over 11,000 full-time associates in
18 countries. For more information about Broadridge, please
visit www.broadridge.com.
For more information about the report or how to purchase it,
please contact Thomas.Marsh@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.