4 Trends We’re Seeing in the Strategist Portfolio Space

Over the past several years, advisors have been increasingly partnering with strategist firms, like our own Fund Strategist Network, to help with the investment management component of their practice. While traditionally a key aspect of an advisor’s value proposition, outsourcing asset allocation, portfolio construction, tax management, risk management, and related activities to these firms has given advisors the opportunity to focus on other wealth management services to help enrich the client experience, enhance relationships, and enable improved outcomes.

We asked our own Brooks Friederich, Director of Research Strategy for Envestnet | PMC, to share the top trends he’s currently seeing in the strategist portfolio space. Advisors (and investors) are more aware of fees.

1. Advisors (and investors) are more aware of fees.

Culturally, buyer behavior is changing. Investors are growing accustomed to shopping for deals and seeking out savings. With investors’ growing awareness of what they’re paying (and the value they’re getting back in return), advisors are taking a more focused, cost-aware approach to their fee structure. Where it strategically makes sense for both their business and clients, they’re looking for opportunities to provide lower-cost services and solutions.

2. Advisors are increasingly adopting UMA technology.

With Unified Managed Account (UMA) technology, advisors are combining multiple strategist models or managers within one account to better meet their clients’ investment objectives. This targeted approach can lead to customized portfolios, in a way that’s scalable, without draining time or resources. Often, advisors are selecting one core multi-asset solution that meets a client’s risk tolerance, for example, and then complementing that with other portfolios that focus on niche asset classes or investment themes, such as impact investing or income, for example, depending on their clients’ goals and their own preferences for portfolio management.

3. Advisors are partnering with only a few select firms.

We’re starting to see advisors gravitate towards aligning themselves with just two or three strategist management firms, large or small, to enhance their value proposition. Rather than maintaining a rolodex of relationships, they’re most often choosing to work with those with whom they’ve had a good experience. An added benefit to this structure is that an advisor can more easily communicate the value of these partnerships to their clients and can more effectively scale their business by leveraging these trusted combinations.

4. Advisors are more flexible with how they run their practice.

This really speaks to the greater trend in advisors partnering with strategist firms. That decision is often related to increased flexibility with how advisors define and communicate their value proposition and the way that they run their business. They’re more comfortable giving these firms the responsibility of managing the investments and building the models because it enables them to offer their clients a broader array of wealth management services, such as lending and insurance. So, while previously advisors may have communicated their value based on their expertise in selecting individual investments and managing the portfolio, they’re now able to offer that service through outsourcing – and complement it with robust offerings related to financial planning – services that have the potential to play a significant role in helping an investor achieve financial wellness.

The impact of strategist firms on advisors’ ability to grow and offer new services, as well as the potential benefit to investors, could make this space one worth watching in the coming months and years. We’ll continue to keep you updated with what we’re seeing and where we think the industry is headed.

The information, analysis and opinions expressed herein are for informational purposes only and do not necessarily reflect the views of Envestnet. These views reflect the judgment of the author as of the date of writing and are subject to change at any time without notice. Nothing contained in this piece is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type.