Are You Simplifying Your Investment Management Process?

by | Oct 14, 2021

By Alex Sauickie, President and CEO at CircleBlack

One of the most challenging things advisors face is having enough time to build client relationships, prospect, and manage the investments of clients. Time must be devoted appropriately to all of these tasks for a firm to grow and clients to continue to be satisfied with the services you provide. But what about customizing portfolios for clients to differentiate your services? When it comes to investment management, advisors have three choices for creating customized portfolios:

Self-manage: create investment models, implement via own back-office but retain control

Use a TAMP: delegate investment models, implementation, and control

Use a Model Marketplace: select investment models, automate implementation, split control

If your firm creates models and customizes portfolios for each client, time is consumed if you aren’t simplifying your investment management process.

A model marketplace is a centralized platform that enables advisors to select from a series of third-party investment models and retain control and discretion to initiate a trade themselves through leveraging trading and rebalancing software. 

With access to well-known third-party asset managers, a model marketplace enables advisors to quickly choose models and develop strategies tailored to specific client needs. Leveraging model marketplace technology provides them with choices to outsource the creation of models, create the models themselves, or use both options depending on clients’ needs. Model marketplaces are also favorable to asset managers who want the distribution of their investment products and models. 

“By bringing together underlying information about the model, advisors can analyze holdings, performance, and sector exposures, and understand the risk characteristics to truly make an accurate comparison. Ultimately they can then make smarter decisions around models. This due diligence is a competitive advantage in a new era of financial advice.”—Advisor Perspectives, How to Navigate the Maze of Model Marketplaces.

What should advisors look for in a robust model marketplace?

  • Ability to develop strategies tailored to specific client needs and goals.
  • Proprietary models to promote areas of advisor expertise.
  • Access to various well-known asset managers to benefit from their specialties
  • Ability to review and filter model strategies by category such as Aggressive, Moderate, and Conservative.
  • Inclusion of characteristic options such as ESG, Tax-aware, and Smart Beta to select the right strategy for clients.
  • Deep level of underlying characteristics of the models (performance, sector exposure, risk, etc.) to perform accurate comparisons and make the best educated decision for the end client.
  • Systematically monitors drift and provides alerts.

For advisors that want to retain control to implement third-party models and have access to third-party asset managers, using a model marketplace is the best way to simplify your investment management process to have more time to build relationships and grow your business.

Alex Sauickie is the CEO of CircleBlack, unified best-of-breed wealth management platform that consolidates data from multiple custodians and allows advisors to choose the best solutions to fit their tech stack.