Displaying items by tag: client management

According to a new report from Cerulli Associates, more advisors will be adopting the use of model portfolios to better serve their clients and free up time to develop their businesses. In the latest Cerulli Edge—U.S. Advisor Edition, 4Q 2022 Issue, the firm noted that the industry’s steady transition toward a financial planning-oriented service model will be a major fact in the increased adoption of model portfolios. Cerulli expects advisors to increase planning offerings over the next year, with 82% of advisor clients receiving targeted or comprehensive financial planning services by 2023. The report also noted that insourcers, or those who either customize portfolios on a client-by-client basis or use practice-level resources to build a series of custom models, spend 18.5% (practice models) and 29.5% (customizer) of their time focused on investment management. If those advisors use model portfolios, it will allow them to reduce their time commitment to less than 10%. The report also notes that advisors that outsource their portfolio construction have clients, on average, that are roughly half the size of those that insource their portfolio construction. Cerulli also found a correlation between model users and younger and smaller advisory practices.

Finsum: A recent Cerulli report predicts an increase in demand for model portfolio outsourcing as the industry transitions to a financial planning service model.

Kestra Investment Management recently announced the launch of its first two model portfolios series. The portfolios, which are exclusively designed for financial professionals associated with Kestra, are structured to maximize opportunities for clients, by providing options based on a client’s risk preference, desire for growth, and tax sensitivity. Both portfolio series have tax-aware versions, are low-cost, and flexible to fit a wide range of client needs. The Strategic Series has a long-term focus with multiple risk profiles. It is designed to be an efficient, streamlined solution with low turnover while still maintaining exposure to potential economic growth. The Dynamic Series is more active and has a higher level of trading activity for investors looking to benefit from changes in economic and market trends. The Kestra Investment Management team will manage the model portfolios. The team will analyze potential investments, use a rigorous due diligence process to select the best-suited funds, monitor portfolio allocations to opportunistically make changes, and regularly rebalance those allocations to keep each portfolio model aligned with its goals.

Finsum: Kestra launched two model portfolio series, one with low turnover and another with a higher level of trading.

A new insurance company plans on selling non-variable annuities directly to consumers. Former Global Bankers Insurance Group executives teamed up to start Pillar Life by forming Pillar Insurance LLC and using the entity to acquire Continental Life Insurance Company. Pillar Insurance renamed Continental Life to Pillar Life last year. The company plans on building a web-based self-service process by April 2023. The insurer has already posted guides to multi-year guaranteed annuity contracts and single-premium immediate annuities on its website. The Interstate Insurance Compact, which is an organization that helps states review product and rate filings, has approved Pillar Life forms for an SPIA contract and a single-premium deferred annuity contract. Pillar Life will also offer life insurance and supplemental health insurance products. For clients, this means they will have more ways to buy annuities on their own. For advisors, however, it will likely make it more difficult to go through the paperwork to find out what clients own.

Finsum:Pillar Life plans on offering non-variable annuities direct to consumers through a web-based self-service model.

According to a survey conducted by Schroder Investment Solutions, more financial advisors are outsourcing investment management to model portfolio services. The survey, which was conducted in May, suggested that the shift towards third-party portfolio management is continuing, with 17% of advisers stating that they have increased their use of outsourced solutions over the past twelve months. The number of advisers that reported outsourcing more than half of their client’s assets had risen from 21% in November to 31% in May. The factors influencing advisor outsourcing include, in order, access to investment expertise and resources, effective volatility management, spending more time with clients, and improved operational effectiveness. For some advisors, investment expertise in sustainable investing has led to outsourcing. Volatility management as a factor reflects an emphasis that advisors have placed on active management during the current market turmoil.

Finsum:Based on the results of a recent survey, more advisors are outsourcing investment management to third-party model portfolio providers due to their investment expertise and volatility management.

The market is seeing some of the highest volatility since the pandemic and before that, you have to go back to the taper tantrum, but how should investors respond? While the most obvious answer is to ‘buy the dip’, the question remains where. Investors should look to industries whose fundamentals haven’t shifted in the most recent months or are less susceptible to the ongoing volatility shifts. This value tilt means leaning towards financials and commodities. Moreover, investors should steer clear of those exactly susceptible to current volatility spikes. Technology and emerging markets are easy stay-aways because inflationary pressures are going to hurt growth stocks and supply constraints will bottle up developing economies for the foreseeable future.

Finsum: More advanced hedging strategies should be considered in equity markets given the volatility, but still tilt toward value.