How To Navigate The Maze Of Model Marketplaces – ValueWalk Premium
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How To Navigate The Maze Of Model Marketplaces

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Q3 2019 hedge fund letters, conferences and more

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For those advisors seeking to outsource their portfolio construction, the proliferation of model portfolios leaves them with an overwhelming challenge to properly analyze the thousands of choices. Indeed, the fate of those who fail to overcome that challenge will be reminiscent of that of Blockbuster Videos.

Remember your neighborhood Blockbuster Video store? In its glory days, it was an enjoyable marketplace where you could go to find your desired movies/videos (unless someone else had rented it first!).

But like many brick-and-mortars, video stores were phased out by forward-thinking technology alternatives (Netflix, Amazon Prime, Hulu, etc.) that made access to your favorite movies and TV shows easier than ever. However, this wasn’t an entirely smooth transition. Eventually streaming services completely disrupted the space, but it wasn’t the most seamless transition for consumers, especially those who weren’t the most technology-enabled. Standards needed to emerge, TV firmware and internet enablement needed to evolve, broadband speeds needed to increase and the content catalogs and user experience needed to adapt.

Disruption led to rapid adaptation, which drove massive adoption.

In the investment management industry, model marketplaces are following a similar path: disruption, adaptation and massive adoption. The technology is there, and advisors see the potential, but there are still roadblocks.

The biggest challenge is the overwhelming volume of available investment alternatives.

You don’t go a week without hearing news about an asset manager’s models being listed in a custodian’s marketplace or an investment management firm coming out with new model strategies. Faced with fee compression, technology alternatives and the continued challenge to sustain and grow their business, advisors must recommend and implement expertly tailored, cost-effective investment portfolios that achieve their clients’ financial goals.

While it’s certainly beneficial for advisors to have more options for client portfolios, there’s also a growing problem: How do advisors make smart investment decisions to meet the unique needs of each client?

Read the full article here by Sean Brown, Advisor Perspectives


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