January 17, 2018
- Director of Product Strategy, TD Ameritrade Institutional
What seems like long ago, advisors realized that they shouldn’t include portfolio performance in their value proposition. That realization was fortunate, as we’re witnessing investment management becoming increasingly commoditized.
In the last five years, the industry has seen the rise of passive investing and robo advisors offering investment management for 30 basis points or less. And in the last 20 years, we’ve seen the number of stocks available on an exchange shrink by more than half. All of these factors may just point to one conclusion: The days of stock picking are all but gone?
However, most Registered Investment Advisors (RIAs) still have their own investment office and continue to pick stocks and create strategies, even though that’s not the main focus of their value proposition. This is because there has never been an easy, cost-effective way to outsource the investment management portion of the business … at least, not until now.
Introducing the TD Ameritrade Model Market Center
Our concept of the Model Market Center is simple: Make models from institutional money managers available to advisors, but let the advisor keep investment responsibility and control. Before the Model Market Center, in a traditional managed account relationship, advisors would relegate their ability to make day to day investment trading decisions. The outsourced investment manager—or overlay manager—took on the day to day trading and investment management of the accounts. The advisor also needed to contact the manager if the end client had even a simple request, like a withdrawal. These obstacles often left end clients feeling underserved by their advisor, and kept the overall adoption rate of managed accounts in the RIA market very low.
We knew advisors needed an easy solution that retained the power and responsibility in their hands and provided the flexibility clients need.
So how does it work?
Think of it as a way for advisors to access investment strategies from well-known third-party asset managers via an online marketplace. Similar to any online shopping experience, advisors can search for models based on characteristics like risk category, asset class, security type, and previous performance. Research materials from the investment managers are also available. After conducting their research and due diligence, advisors can subscribe to a third-party model with one click. And because the Model Market Center is accessed from within the iRebal on Veo® platform, the rebalancing functionalities in iRebal can be leveraged to rebalance customer accounts quickly and easily using all or part of the models.
When the manager makes a model allocation change, notifications are available via the Model Market Center. But, being mindful of the control that an RIA needs, the Model Market Center is flexible enough to allow the advisor to make alternate decisions. For example, if an advisor has a long-standing philosophy that a particular sector should be avoided, and the manager adds that sector to the model, the advisor can easily make an alternate decision for their clients. The models should be seen as part of their research, not as mandates.
The creation of the Model Market Center hopes to help solve the commoditization of investment management conundrum that RIAs are facing by allowing them to gain direct access to institutional-grade investment management resources so that they don’t have to create their own models. RIAs can reallocate the time saved building models to where it most belongs: helping their clients.
Watch the video or read the fact sheet to learn more about the Model Market Center.
To find the Model Market Center in iRebal on Veo®, go to Create and Configure, then Models in the navigation menu and click Model Market Center.
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Material made available through the Model Market Center is provided by third-party Model Managers who are separate from and unaffiliated with TD Ameritrade. TD Ameritrade has not paid for or been involved in the preparation of the content, and has not verified, endorsed or approved the content. TD Ameritrade assumes no responsibility for any fact, recommendation, opinion or advice contained in any such model portfolio or materials and expressly disclaims any responsibility for any investment decisions or for the suitability of any security or transaction based on it.
Model Market Center is an offering of TD Ameritrade, Inc. Registered Investment Advisor (RIA) that leverages iRebal® on Veo® technology to provide independent RIAs access to model portfolios provided by third-party asset managers. iRebal products and services are property of ThinkTech, Inc., an affiliate of TD Ameritrade, Inc. Brokerage services provided by TD Ameritrade Institutional, Division of TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2017 TD Ameritrade.
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