One could argue that the majority of financial advisors would be better served by spending more time meeting with clients and prospects, and outsourcing investment management to outside experts.
“Money management is a commodity,” says Don Patrick, President and CEO, Integrated Financial Group. “It is rare that a financial advisor/planner can add Alpha. And, in the rare case they do, what is the cost/benefit?” he asks. “Investment management drains time and money. It should be outsourced by most.”
Proprietary research by Technology Tools for Today (T3) indicates that some RIA firms spend more than 80% of their technology dollars on investment related technology, yet that investment rarely produces superior investment results. With the cost of investment management shrinking to an all time low, many advisors would be better served devoting their resources to more productive pursuits such as financial planning, client engagement and prospecting.
A portion of the advisor population has already gravitated to some form of outsourced investment management, be it a turnkey asset management program (TAMP), an automated digital platform (robo-advisor), or some other similar solution. The reason, I suspect, that more advisors have not outsourced investment management is some of the constraints that outsourcing places on advisors. For example, TAMPs and robo-advisors do not typically allow advisors to control the timing of trades, thereby limiting if not eliminating their ability to control the tax consequences of trades for their clients. TAMPs and other similar platforms often limit advisors’ ability to customize client reporting.
The TD Ameritrade Institutional Model Market Center, however, which recently launched, allows advisors an unprecedented level of flexibility at a very low cost. For those advisors who want to exert more control of portfolio decisions, the Institutional Market Center provides the flexibility to do so in a streamlined fashion. Advisors can use their existing portfolio management and reporting solutions to deliver customized reports to clients.
This platform lets independent RIAs on the TD Ameritrade Institutional platform leverage the brain power of leading money managers right from their desktops, without the constraints and complexity that come with outsourcing solutions.
With Model Market Center, advisors can select from a broad menu of third-party investment models in one, central location. The platform then seamlessly leverages iRebal® on Veo® — TD Ameritrade’s trading and portfolio management technology — to execute those models in the manner they choose. As providers update their models, changes are automatically communicated to advisors.
For do-it-yourself advisors, Model Market Center can save the time spent building models from scratch, so they can devote more time working with clients and financial planning, while retaining investment management fiduciary control and responsibility, flexibility, and trading discretion.
And for those that employ traditional third-party platforms, Model Market Center can represent a less costly alternative. A broad menu of models is available to advisors at no additional fee, and there’s no investment minimum for assets held at TD Ameritrade Institutional.
A MODERN APPROACH
“Advisors are increasingly seeking efficiencies. With this platform, we are delivering what we believe to be a more modern approach,” said Danielle Fava, director of product strategy and development at TD Ameritrade Institutional. Model Market Center currently offers access to a selection of models from eight investment managers:
Model Market Center is an open-architecture platform and we expect to add more providers and models over time,” Fava said.
ALTERNATIVE TO TRADITIONAL TAMPS
Model Market Center presents advisors with an alternative to the traditional TAMP model. After advisors complete their due diligence, they can subscribe to investment models and download them directly into iRebal on Veo®, the powerful, tax-efficient rebalancing tool available at no additional cost for accounts held with TD Ameritrade Institutional. There, advisors can implement one model or blend multiple models — including those they build themselves — based on the unique needs of each client account.
The models currently available are comprised of ETFs and mutual funds, but over time may include individual stocks and other securities. Some models leverage TD Ameritrade’s expanded menu of commission-free funds available through the ETF Market Center.
Since Model Market Center was activated on Oct. 30, 2017, more than 1,000 independent RIAs utilizing the TD Ameritrade Institutional platform have signed on; many are already putting the Model Market Center to work with their clients’ assets.
In my opinion, TD’s Model Market Center represents an important step forward in investment technology. When leveraged in combination with VEO and iRebal, it is a powerful, cost-effective tool for financial advisors.