Managers Embrace the Role of Asset Allocation Model Providers to Stay Relevant


Managers Embrace the Role of Asset Allocation Model Providers to Stay Relevant

Managers turn to asset allocation models that aim to optimize advisors’ client portfolios across all relevant asset classes to protect against product commoditization

July 2019, BOSTON - This issue of The Cerulli Edge—U.S. Monthly Product Trends Edition analyzes mutual fund and exchange-traded fund (ETF) product trends as of June 2019. This issue also includes special coverage on the asset allocation model landscape, which offers perspectives on asset mangers’ roles as model providers, and assesses opportunity within the segment.

Highlights from this research:

  • The role of model asset allocation provider offers asset managers an unparalleled opportunity to maintain their relevance but will require consistent efforts to generate returns that may be difficult to calculate. Model providers, such as asset managers, broker/dealers (B/Ds), third-party asset management providers (TAMPs), etc., can benefit by deriving revenue from explicit asset allocation fees, fees on underlying products, increased brand awareness, and stronger relationships with their B/D distribution partners.
  • Total mutual fund assets have climbed 13.8% since December 2018, finishing the first half of 2019 above $15.3 trillion. Net flows are positive ($89.4 billion), thanks to $126.8 billion moving into passive product. ETF assets finished the first half of 2019 at just less than $4 trillion in assets, having increased 17.2% during the first six months of 2019. Total net flows moving into ETFs during that timeframe equal $131.1 billion, or 3.9% organic growth.
  • Measuring the potential market for model portfolios is primarily dependent upon understanding the degree to which advisors currently employ a variety of inputs in helping them develop client portfolios. Most notably, wirehouse advisors (8%) and independent registered investment advisors, or RIAs (7%), are least likely to embrace full portfolio discretion outsourcing, while insurance (23%) and independent B/D (IBD) advisors (18%) are much more comfortable using these services. With more than $20 trillion in total advisor assets, there are ample prospects across channels for model providers. While the scale of the wirehouse channel is certainly evident, higher addressability levels in the IBD and bank channels offer appealing opportunities for model providers hoping to convert model targets (advisors who primarily rely on external models, but make modifications).



These findings and more are from: The Cerulli Edge—U.S. Monthly Product Trends Edition, July 2019 Issue.

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