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What Advisors Should Know About Third-Party Models

WisdomTree Investments

This article was originally published on ETFTrends.com.

By Brad Shepard, WisdomTree Head of Advisor Innovation

This article is relevant to financial professionals who are considering offering model portfolios to their clients. If you are an individual investor interested in WisdomTree ETF Model Portfolios, please inquire with your financial professional. Not all financial professionals have direct access to these model portfolios.

In my previous blogs, I discussed what your clients really think about third-party models and what they really think about you, their advisor. The bottom line is that clients welcome models and tend to think better of advisors who use them.

And while advisors may be using their own models, we discovered that there may be some challenges with this approach, as well as some advantages to using third-party models with their clients.

Advisors’ models may need to be modernized

Though many advisors have their own models, the majority were built a long time ago. We also discovered that many advisors would have opted for third-party models instead of building their own had they been available at the time.

  • 75% of self-built models were developed between 5 and 15 years ago (53% more than 10 years ago)

  • 82% of advisors agreed or strongly agreed that if third-party models had been around when they began, they would have started with them instead of developing their own

Third-party models could provide many benefits to advisors’ practice

We found that advisors often appreciate the advantages third-party models can provide to their practice, including the help to meet increasing regulations.

  • 92% believe models could help improve the efficiency of their practice

  • 90% believe models provide a defined process that can help with increasing regulatory scrutiny

  • 66% of advisors believe their practice could better handle fee compression if they implement third-party models

Third-party models help advisors provide benefits to their clients

Our research also uncovered that the majority of advisors believe using models could provide many advantages to their clients.

  • 94% of advisors believe models enable them to apply institutional-quality research and analysis to their clients’ portfolios

  • 90% believe models provide an efficient way to share their investment strategies with clients

  • 90% believe models will help them create a consistent client experience

Using third-party models in your practice could provide benefits for both you and your clients. They could help grow your business and meet your clients’ needs more effectively.

For more information on our model portfolios, please visit our website.

Important Risks Related to this Article

For financial professionals: In the event that you subscribe to receive a WisdomTree model portfolio, you will receive investment ideas from WisdomTree in the form of a model portfolio. The information is designed to be used by you solely as a resource, along with other potential sources you consider, in providing advisory services to your clients. WisdomTree’s model portfolios are not intended to constitute investment advice or investment recommendations from WisdomTree. WisdomTree is not responsible for determining the securities to be purchased, held and/or sold for your clients’ accounts, nor is WisdomTree responsible for determining the suitability or appropriateness of a model portfolio or any securities included therein for any of your clients. WisdomTree does not have investment discretion and does not place trade orders for any of your clients’ accounts. Information and other marketing materials provided to you by WisdomTree concerning a model portfolio—including holdings, performance and other characteristics—may not be indicative of your client’s actual experience from investing in one or more of the funds included in the model portfolio. The model portfolios, allocations and data are subject to change.

For end users: WisdomTree’s model portfolios are not intended to constitute investment advice or investment recommendations from WisdomTree. Your investment advisor may or may not implement WisdomTree’s model portfolios in your account. WisdomTree is not responsible for determining the suitability or appropriateness of a strategy based on WisdomTree’s model portfolios. WisdomTree does not have investment discretion and does not place trade orders for your account. This material has been created by WisdomTree and the information included herein has not been verified by your investment advisor and may differ from information provided by your investment advisor. The model portfolios, allocations and data are subject to change.

Investors and their advisors should consider the investment objectives, risks, charges and expenses of the funds included in any model portfolio carefully before investing. This and other information can be obtained in the funds’ prospectus by visiting www.wisdomtree.com for WisdomTree Funds. Please read the prospectus carefully before you invest in a fund. WisdomTree Asset Management Inc. does not endorse and is not responsible for or liable for any content or other materials made available by other ETF sponsors.

WisdomTree primarily uses WisdomTree ETFs in the model portfolios unless there is no WisdomTree ETF that is consistent with the desired asset allocation or model portfolio strategy. As a result, WisdomTree model portfolios are expected to include a substantial portion of WisdomTree ETFs notwithstanding that there may be a similar ETF with a higher rating, lower fees and expenses, or substantially better performance. Additionally, WisdomTree and its affiliates will indirectly benefit from investments made based on the model portfolios through fees paid by the WisdomTree ETFs to WisdomTree and its affiliates for advisory, administrative and other services.

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