Wealthtech Insider (11/18/20)

Orion Thought Leader Q&A Series

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Rusty Vanneman

Rusty Vanneman on the Rise of Model Portfolios

By Kelly Waltrich, CMO |Orion

Dear Reader,

Last week, Orion announced that it has expanded its partnership with BlackRock, the world’s largest asset manager. The partnership will expand advisers’ access to a more diverse range of BlackRock model portfolios.

Model portfolios used to come from smaller, boutique firms. But as industry heavyweights like Fidelity and BlackRock embrace model strategies, I wanted to explore why we’re seeing this trend.

Today, I speak with Orion CIO Rusty Vanneman about this trend and what it means for our industry and business moving forward.

Kelly Waltrich: Thank you for your time, Rusty. So, there are a lot of reasons why model portfolios are more prominent in our industry. Could you walk us through some of them?

Rusty Vanneman: Certainly. For starters, larger companies see the growth rates associated with model portfolios.  They can see the consistent growth and how profitable they are. Model portfolios are a way for these firms to offer their entire investment philosophy while not costing a lot to manufacture.

Kelly Waltrich: But it’s not just about profitability, right? Models have become a lot easier for advisors to implement, too.

Rusty Vanneman: That’s right. The technology component makes it so much easier for investors to achieve success with model portfolios as technology now allows a consistent, convenient and disciplined approach for investors to use. For example, 20 years ago I once worked at a large RIA in the greater Boston area that had initially built its expertise with investors with a newsletter that was physically mailed out each month. It provided reliable advice, and had a great track record, but it became evident that many subscribers weren’t able to consistently manage their portfolios to the newsletters.

Back then, if you wanted to compare the newsletter to its competition over philosophy or performance, that wasn’t easy. It wasn’t a simple process to follow and execute all the trades either. People simply didn’t have the time to do this.

Now, technology makes it easier than ever to follow different portfolios and strategies. You can pull up screens on a model marketplace and measure portfolio positioning, performance and more. Then you can decide if you want to shop or stick with the portfolio.

Kelly Waltrich: In other words, models are easier to use than they’ve ever been. But who’s using them? How are they going to help advisors or investors?

Rusty Vanneman: Advisors are under a lot of pressure to grow and stay relevant to investors who have expectations of individualized service. Models have emerged as a solution to both challenges, thanks to the technology and growing support we just discussed.

With models, advisors can take advantage of scale while still offering investment portfolios that line up with an investor’s stated goals. But there’s a behavioral element to their popularity, too.

Kelly Waltrich: How do you mean?

Rusty Vanneman: A big part of the advisor-client relationship is taking advantage of what you can control. We can’t predict what the market is going to do, but good model strategies will perform consistently over time. Advisors can use that consistency to manage expectations… and build confidence, too.

When advisors are confident in how a model portfolio will work, and they’re confident the model syncs up with an investor’s goals, they can work on meeting those planning goals and showing their progress without investors second-guessing or obsessing over “beating the market.”

Kelly Waltrich: And that’s one of the keys to connect investing to the larger, fiduciary framework of Prospect, Plan, Invest, Achieve.

Rusty Vanneman: Exactly. It’s not just about the investment portfolio. In the context of a modern tech platform, you have this flow of data from your marketing campaigns, your initial planning sessions… and it all guides you to models that help create success over time for investors.


Kelly Waltrich is Chief Marketing Officer of Orion Advisor Solutions. Connect with her on LinkedIn or follow her on twitter at @kdubs_waltrich.