Model Portfolio Adoption on the Rise Among FAs: State Street
Investor awareness and satisfaction with model portfolios has risen through the ranks given benefits including lower fees, closer portfolio monitoring, and greater advisor involvement, new research shows.
State Street Global Advisors’ Model Portfolios: Adaptive Solutions for Advisory Growth research shows a considerable rise in model portfolio adoption, with advisors reporting an average of 39% of assets under management in model portfolios, up from 32% in 2021. According to the report, 54% of advisors employ bespoke models, 45% source from broker-dealer platforms, and 53% from third-party sources.
Key findings indicate that investors with assets in model portfolios are more satisfied with their advisors (95% versus 79%) and have a better comprehension of their financial goals (93% versus 79%). However, there is a significant perception gap in fee awareness, with 87% of advisors saying clients understand their costs and only 58% of clients agreeing. Despite increased usage, investor knowledge of model portfolios has remained stable at 57% since 2019.
“Model portfolios have evolved into a powerful tool for advisors seeking to scale their practices efficiently while enhancing the quality of personalized, client-centered wealth management,” said Brie Williams, global head of advisory solutions and wealth intelligence at State Street Global Advisors.
The survey was conducted by State Street Global Advisors in collaboration with A2B Planning and Prodege from March to May 2024. Eight interviews with U.S. financial advisors who have at least $25 million in assets under management, an online survey of 200 U.S.-based financial advisors, and interviews with SME providers in the U.S. were all included in the study.
In recent years, model portfolios have become a compelling solution for wealth managers. The trend of outsourcing portfolio construction is expected to continue to grow, as it frees up time for financial planning with clients or prospecting to expand their practice, in addition to offloading investment management obligations.
