Model portfolios delivering benefits to advisers, investors alike

New research from State Street Global Advisors has found that model portfolios have risen through the ranks as a popular investment vehicle for both financial advisers and investors due to several benefits.

The asset management business’ Model Portfolios: Adaptive Solutions for Advisory Growth report, based on a survey of 250 advised Australians with investable assets of USD500,000, indicated that awareness of model portfolios has increased in the last five years from 49 per cent in 2019 to 67 per cent now.

Of the two-thirds of those surveyed who are now aware of this investment vehicle, more than 50 per cent said they have assets managed within model portfolios.

“With more than half of Australian financial advisers now using managed accounts, it’s great to see the benefits are transcending to investors. As many Australians face the cost of living crunch, investors say lower fees is a key benefits of having their assets in model portfolios,” State Street Global Advisors’ Head of Model Portfolios EMEA and APAC, Kathleen Gallagher, said.

“Also it is not surprising that that our research found 73 per cent of investors who have assets in models were satisfied with the fees for value of services, while only to 55 per cent of non-model portfolio investors said they felt satisfied with their fee structure.

“Model portfolios are transforming the way financial advisers in Australia serve their clients. By leveraging ETFs as building blocks, financial advisers are now offering ready-made solutions that fully optimise portfolio management and compliance work – similar to providing the cake for investors, rather than just the ingredients.

“This approach not only provides meaningful and efficient investment strategies, but also means financial advisers can spend more time on what matters most – building stronger client relationships.”

The survey also revealed that just under three-quarters (74 per cent) of Australian investors want more tailored services and a “comprehensive view” of their financial goals from their financial advisers.

According to the same pool of survey participants, model portfolios helped achieve this, with 87 per cent reporting that they freed up more of their adviser’s time and that their portfolio was being managed more effectively than if it was developed and monitored by their adviser.

 “Australians are expecting their advisers to take a more holistic approach to deliver comprehensive, personalised financial advice that includes planning for life goals, accumulation, income, tax efficiency and risk management,” State Street Global Advisors’ Head of Intermediary, Australia, Tim Bradbury, said.

“Advisers that use managed accounts have reported that they, or their support staff, save on average 22.8 hours per week. Model portfolios empower advisers to optimise their time, allowing them to focus on providing holistic guidance which is the most important to their clients.

“Advisers are creating additional efficiencies through providing model portfolios to their clients on investment platforms. The powerful combination of this technology coupled with model portfolios is a key evolution in providing investment solutions and advice cost-efficiently.”