Australian investors benefit from adviser use of model portfolios, State Street Global Advisors new research reveals
Kathleen Gallagher
State Street Global Advisors, the asset management business of State Street Corporation (NYSE: STT), today released the results of its Model Portfolios: Adaptive Solutions for Advisory Growth research, revealing investor awareness and allocation of assets into model portfolios is on the rise in Australia.
Two-thirds (67%) of Australians are aware of model portfolios now, compared with just 47 per cent in 2019. With awareness of models rising, so too is the proportion of investors who have assets in this investment vehicle through their financial advisers. Among those who are aware of models, over half report having assets managed within model portfolios.
Model portfolios are a collection of assets – including ETFs, stocks and bonds – that are continuously managed by investment managers. These portfolios employ a diversified investment approach to achieve a specific balance of return and risk, or to meet a particular portfolio objective. Typically, Australian investors access model portfolios through managed accounts.
State Street Global Advisors’ Head of Model Portfolios EMEA and APAC, Kathleen Gallagher, says: “With more than half of Australian financial advisers now using managed accounts[1], it’s great to see the benefits are transcending to investors. As many Australians face the cost of living crunch, investors say lower fees is a key benefits of having their assets in model portfolios. Also it is not surprising that that our research found 73 per cent of investors who have assets in models were satisfied with the fees for value of services, while only to 55 per cent of non-model portfolio investors said they felt satisfied with their fee structure. ”
On surveying investors on their views towards working with financial advisers, State Street Global Advisors’ survey found that 74 per cent of Australian investors want more personalised advice from their adviser that covers a comprehensive view of their financial priorities.
This view was reflected among investors when asked what they saw as the key benefits of their adviser having their assets in model portfolios. An equal 87 per cent of Australian investors see their portfolio being monitored more closely than if it was made and managed by their adviser, and getting more of their adviser’s time as the top benefits.
State Street Global Advisors’ Head of Intermediary, Australia, Tim Bradbury, says: “Australians are expecting their advisers to take a more holistic approach to deliver comprehensive, personalised financial advice that includes planning for life goals, accumulation, income, tax efficiency and risk management. Advisers that use managed accounts have reported that they, or their support staff, save on average 22.8 hours per week.1 Model portfolios empower advisers to optimise their time, allowing them to focus on providing holistic guidance which is the most important to their clients. Advisers are creating additional efficiencies through providing model portfolios to their clients on investment platforms. The powerful combination of this technology coupled with model portfolios is a key evolution in providing investment solutions and advice cost-efficiently.”
Ms. Gallagher concludes: “Model portfolios are transforming the way financial advisers in Australia serve their clients. By leveraging ETFs as building blocks, financial advisers are now offering ready-made solutions that fully optimise portfolio management and compliance work – similar to providing the cake for investors, rather than just the ingredients. This approach not only provides meaningful and efficient investment strategies, but also means financial advisers can spend more time on what matters most – building stronger client relationships.”
The research, based on a survey of 250 Australian who work with a financial adviser and have investable assets of USD500,000 (around AUD782,750), aims to better understand views and expectations around model portfolios.
State Street Global Advisors officially launched its ETF Model Portfolio capability in the Australian market in 2019. Today, it offers six model portfolios across the risk spectrum and target income strategy.
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