collage of technology and stock charts 83 percent of advisors surveyed say that modelportfolios are essential in giving them the time to devote tothings that clients want, such as planning. (Photo:Shutterstock)

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In the quest to keep up with the complexities of business thesedays, financial advisors are increasingly turning to modelportfolios, and more assets are expected to flow to models over thenext two years.

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That's according to new data from Broadridge FinancialSolutions, Inc.  Advisors' drive to stayabreast of competition, coupledwith new developments in technology that providegreater assistance in designing and managing models, leads many tomodel portfolios. Currently, 85 percent use model portfolios; 70percent combine models with custom portfolio design.

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And assets are wending their way into these model portfolios,with more than half—54 percent—already there; respondents expectthat to grow to 58 percent over the next two years.

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Why the shift?

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According to 65 percent of financial advisors who use them and35 percent of those who don't, business scalability is the bigdriver.

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In addition, 50 percent say leveraging investment managementexperts is the reason; 47 percent say it's to focus their effortson client building and retention; and 36 percent point to effortsto deal with compliance and regulation.

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In addition, 78 percent of advisors say their clients are lessinterested in outperforming the market than they are in planning,service and support, and 83 percent say that model portfolios areessential in giving them the time to devote to those efforts.

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Advisors do predominantly still think such things are moresuited to smaller portfolios—73 percent prefer them for portfoliosunder $500,000, while 46 percent prefer them for the under-$1million portfolios and just 31 percent for portfolios over $1million.

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And there's also concern about being regarded as “lazy” forusing them, especially among the 15 percent of respondents whodon't use them.

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Among that group, the report says, 69 percent say theydefinitely or probably won't start to use models in the next twoyears; 59 percent see managing money as part of their value-add forclients; and 51 percent believe their clients are expressly payingfor customized solutions.

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Respondents offer various reasons why they're leery ofmodels, with 51 percent believing that model portfolio usage makesit harder to differentiate versus robo-advisors; 46 percentbelieving that model portfolios are not as effective in down orhighly volatile markets; 45 percent saying that model portfoliosmake it harder to assess risk; and 35 percent fearing clients willthink they're lazy if they use models.

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READ MORE:

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Risk exposure: Does your plan still offer companystock as an investment option? 

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3 takeaways on trends in advisorinvesting

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2019 stock market outlook: slower growth but norecession

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Marlene Satter

Marlene Y. Satter has worked in and written about the financial industry for decades.