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Financial Advisors Divided on Third-Party Investment Strategies, COVID-19 Prompts Reflection on Overseeing Client Assets

Third-party models enable time savings, more client engagement, but heightened uncertainty leads advisors toward hands-on portfolio management, YCharts survey found

CHICAGO--(BUSINESS WIRE)--YCharts, an investment research, analytics, and client communications platform, has released the results of the company’s latest research report, “Advisor Sentiment Survey: Coronavirus, Third-Party Models & In-house Portfolio Management.” The report revealed that 2020’s market volatility caused by the COVID-19 pandemic has elicited advisors to become more involved in portfolio management; adopting third-party model portfolios carries both noteworthy benefits and significant trade-offs in regard to client service; and third-party models are difficult to evaluate and compare to other investment strategies.


The coronavirus crisis caused speculation about third-party portfolio management

COVID-19 ended the historic 11-year bull market, and as a result, has reduced advisors’ comfort levels with using third party model portfolios. Advisors who transitioned to outsourced model portfolios in the last year are now less confident in those strategies. The survey found that, of the more than 300 financial advisor respondents, 41 percent who onboarded third-party portfolios in the last year feel much less comfortable with those solutions, while 22 percent of all advisors who use third-party models plan to decrease the percentage of assets invested in those models.

Advisors who build portfolios in-house responded that they are equally or more confident in their investment strategies in light of COVID-19’s impact on the market. More than half of advisors that build portfolios in-house are no more or less confident using their own strategies, while 42 percent said they are even more confident after the market downturn caused by COVID-19.

More client face time or personalized portfolio management? Advisors face tough decisions

Advisors must weigh the benefits and trade-offs of leveraging third-party model portfolios versus managing client portfolios in-house. According to the survey data, 72 percent of advisors who use third-party models agree that outsourced portfolio management enables them to spend more time with clients and prospects, while 40 percent of advisors managing portfolios in-house acknowledge that they have less time to interact with clients and prospects.

A similar point of agreement between the two groups, 71 percent of advisors who outsource portfolio management agree that a disadvantage of third-party models is a lack of personalized service, and 90 percent of those building and managing their own portfolios agree that they’re able to deliver more personalized service to their clients.

The full picture on third-party model portfolios is often cloudy

The myriad investment strategies that advisors have at their disposal has further complicated their decision-making process. Fifty-two percent of advisors say the most difficult thing about evaluating third-party model portfolios is making "apples to apples" comparisons across different providers, while 44 percent concluded that marketing material is too one-sided.

“The 2020 market crash caused an unprecedented disruption in many advisor-client relationships,” said Sean Brown, CEO and President at YCharts. “Whether advisors are opting to become more involved in portfolio management or are confident in their outsourcing strategies, it’s imperative that they have tools and data at their disposal to help them make smart investment decisions and are able to effectively communicate with clients regarding their investment strategies."

Today’s advisors require solutions to evaluate third-party models and compare them head-to-head, or tailor portfolios to best meet client needs. For both investment management options, YCharts enables advisors to explain the strengths, benefits and trade-offs of any investment strategy.

For more insights from the “Advisor Sentiment Survey: Coronavirus, Third-Party Models & In-house Portfolio Management” research, please download the detailed report. To learn more about how YCharts’ Model Portfolios application enables advisors to better educate their clients on concepts like performance, risk and diversification, win new business with customized proposals, and compare and contrast investment strategies, please visit ycharts.com.

About YCharts

YCharts is an investment research platform that enables smarter investments and better client communications, serving a client base of more than 5,000 RIAs, financial planners, and asset managers who oversee more than $750 billion in assets. YCharts provides intuitive tools that help advisors optimize their investment strategies, and customizable sales enablement materials that support advisors' and asset managers' business development. A leading financial research platform, YCharts offers comprehensive data, powerful visualization tools, and advanced analytics for equity, mutual fund, and ETF data and analysis. As a modern, user-friendly platform for security research, portfolio construction, idea generation, and market monitoring, YCharts enables vast time savings and serves as an affordable alternative to terminal-based tools. For more information, visit ycharts.com, contact sales@ycharts.com, or follow on Twitter at @ycharts.

About the “Advisor Sentiment Survey: Coronavirus, Third-Party Models & In-house Portfolio Management” report

The survey of more than 300 financial advisors was conducted in July 2020. Seventy-six percent of respondents identified as Registered Investment Advisors (RIAs) or dually-registered RIAs, and 24 percent indicated employment at a broker-dealer.


Contacts

Media Contact for YCharts
Will Ruben
Head of Communications
(847) 208-8289
will@ycharts.com