Model Portfolios

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Nov 25, 2009 3:36 pm

For advisors that are RIA's or indy, and are generally running models for fee-based accounts, are you using firm-provided model portfolios (either find/ETF or stocks), or your own research, or 3rd party models?  Specifically, curious about the due diligence process for choosing funds and ETF's, and how expensive 3rd party modeling is typically.

Nov 25, 2009 9:52 pm

Personally, I run my own model portfolios for clients.  I have two versions, one that is 100% mutual funds and then another that is 80-85% ETFs and then remaining in MF for International Equity and specialty areas I can't get in ETFs.

If you are looking at 3rd party models, you can go to SEI and they don't charge you anything for their MF models b/c they are making their money off the MF expenses.  The only problem with SEI is that the assets have to be custodied with them.  Other MF or ETF models can range from 0.40% - 0.75% from what I've seen.  You can offset some of that cost if the MF pay 12b-1s that you could keep.  A lot of 3rd party firms will keep the 12b-1s too.

Nov 26, 2009 7:04 pm

Thanks ICE. It's not that I have a problem with building them myself. I already do. I would just like to be able to benchmark against other "model" portfolios, and possibly be able to tell clients there is a "research department" or some other formal methodology for picking funds, other than "just trust me". Even though I honestly believe my portfolios provide better protection than "professionally" designed portfolios (my rationale in a minute), it's an easier story to tell when you have "expert" research backing you up.



The reason I believe I (and many of us) can construct better risk-based portfolios, is that most "research departments" (at major B/D's) follow the standard asset allocation methodology and standard buy-and-hold theory.....not that they necessarily think that's the best way to manage money, but it follows the industry standard/CFP standard methodology, so they are protecting themselves legally. "Hey, everyone lost money!" I love when Goldman or Merrill or whoever comes out with their allocations...."We're strategically moving from 18% Large Cap Domestic to 16%, and increasing International Large Cap to 14% from 12%".....Like that makes any bit of difference in the grand scheme of things.

Nov 27, 2009 12:41 am
B24:

Thanks ICE. It's not that I have a problem with building them myself. I already do. I would just like to be able to benchmark against other "model" portfolios, and possibly be able to tell clients there is a "research department" or some other formal methodology for picking funds, other than "just trust me". Even though I honestly believe my portfolios provide better protection than "professionally" designed portfolios (my rationale in a minute), it's an easier story to tell when you have "expert" research backing you up.



The reason I believe I (and many of us) can construct better risk-based portfolios, is that most "research departments" (at major B/D's) follow the standard asset allocation methodology and standard buy-and-hold theory.....not that they necessarily think that's the best way to manage money, but it follows the industry standard/CFP standard methodology, so they are protecting themselves legally. "Hey, everyone lost money!" I love when Goldman or Merrill or whoever comes out with their allocations...."We're strategically moving from 18% Large Cap Domestic to 16%, and increasing International Large Cap to 14% from 12%".....Like that makes any bit of difference in the grand scheme of things.



Aren't you confusing strategic portfolios with tactical portfolios?

Nov 27, 2009 8:35 am
iceco1d:

B24 - I'll help you build your MF and ETF models for free. Seriously.







wow will you really ? gee thanks .. I've always wanted a 28 year old newbie who has so , so much experience in his 6 year career to help me . Are you sure it's really free. This is awesome, how can I ever thank you !

Nov 27, 2009 11:18 am

mel,

 
u bears might not be able to keep dow down TODAY
 
funny 
Nov 27, 2009 12:32 pm
noggin:
B24:

Thanks ICE. It's not that I have a problem with building them myself. I already do. I would just like to be able to benchmark against other "model" portfolios, and possibly be able to tell clients there is a "research department" or some other formal methodology for picking funds, other than "just trust me". Even though I honestly believe my portfolios provide better protection than "professionally" designed portfolios (my rationale in a minute), it's an easier story to tell when you have "expert" research backing you up.

The reason I believe I (and many of us) can construct better risk-based portfolios, is that most "research departments" (at major B/D's) follow the standard asset allocation methodology and standard buy-and-hold theory.....not that they necessarily think that's the best way to manage money, but it follows the industry standard/CFP standard methodology, so they are protecting themselves legally. "Hey, everyone lost money!" I love when Goldman or Merrill or whoever comes out with their allocations...."We're strategically moving from 18% Large Cap Domestic to 16%, and increasing International Large Cap to 14% from 12%".....Like that makes any bit of difference in the grand scheme of things.



Aren't you confusing strategic portfolios with tactical portfolios?






 
Well, both really, but most major firms don't publish tactical portfolios that I am interested in.  And actually, I am talking also about research - model stock and MFD/ETF portfolios.  Not so much the allocations, but more the research of the stocks and the funds.  As I mentioned above with the Goldman Sachs comment, I could care less about who says go 16% Domestic and who says 18% domestic.
As funny as it sounds, clients actually like knowing that in our Advisory program at Jones, there is a rigourous and consistent research process done by someone other than just me.
Nov 27, 2009 12:49 pm

You are starting to sound SO independent my friend.....

Nov 28, 2009 11:56 am
pop:
iceco1d:

B24 - I'll help you build your MF and ETF models for free.  Seriously.  

wow will you really ? gee thanks .. I've always wanted a 28 year old newbie who has so , so much experience in his 6 year career to help me . Are you sure it's really free. This is awesome, how can I ever thank you !

Leave the bullcrap snark for your other online forums and try to bring one tenth the professionalism ice brings here. He's earned the respect of others that you've already burned, seven posts in.
 
 
Nov 28, 2009 12:10 pm
noggin:

You are starting to sound SO independent my friend.....


 
yeah, right? Watch out, B ... LOL!
Nov 29, 2009 12:42 pm

If you have access to morningstar hypotheticals you can backtest against several hundred benchmark options.  I us MF models based on previous firms wrap product research and my own research.  My risk adjusted returns are quite good and clients are very happy.

Nov 29, 2009 12:50 pm
mrclutch:



If you are looking at 3rd party models, you can go to SEI and they don't charge you anything for their MF models b/c they are making their money off the MF expenses.  The only problem with SEI is that the assets have to be custodied with them.  Other MF or ETF models can range from 0.40% - 0.75% from what I've seen.  You can offset some of that cost if the MF pay 12b-1s that you could keep.  A lot of 3rd party firms will keep the 12b-1s too.



I have looked at the SEI website and I can not find their models.  Do you have a link or can you direct me in how to access their models ?

Always good to see what others are doing.

Thanks in advance !

Nov 29, 2009 1:26 pm

I think you will have to talk to someone directly at SEI.  They don't post any of that on their website.  They don't play well in other people's sandboxes

Nov 29, 2009 2:55 pm
exUBS:

If you have access to morningstar hypotheticals you can backtest against several hundred benchmark options.  I us MF models based on previous firms wrap product research and my own research.  My risk adjusted returns are quite good and clients are very happy.

 
I would never use morningstar hypotheticals especially with active managed funds.. There is no mathmatical way to figure out if it will work for the next 10 years. Most active managers make selections based on something intangible(after they separate all the company by tangible numbers)
Nov 29, 2009 2:57 pm
exUBS:
mrclutch:



If you are looking at 3rd party models, you can go to SEI and they don't charge you anything for their MF models b/c they are making their money off the MF expenses.  The only problem with SEI is that the assets have to be custodied with them.  Other MF or ETF models can range from 0.40% - 0.75% from what I've seen.  You can offset some of that cost if the MF pay 12b-1s that you could keep.  A lot of 3rd party firms will keep the 12b-1s too.



I have looked at the SEI website and I can not find their models.  Do you have a link or can you direct me in how to access their models ?

Always good to see what others are doing.

Thanks in advance !

 
 
Everyone uses SEI for managed so not a very good way to separate yourself
Nov 29, 2009 6:11 pm

You should check out Riverfront Investment Group.  Mike Jones, Rod Smith and Doug Sandler.  Research Mag ETF Hall of Fame    www.riverfrontig.com

 
they have an advisor site that posts all of thier models and trades. 
Nov 29, 2009 7:40 pm
flyin:

You should check out Riverfront Investment Group. Mike Jones, Rod Smith and Doug Sandler. Research Mag ETF Hall of Fame    www.riverfrontig.com



they have an advisor site that posts all of thier models and trades.







smith et al are good