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Key Takeaways

  • The need to deliver effective, customized and operationally efficient investment solutions, specifically with custom models, is well defined.
  • The challenge has been solving the operational frictions that, until recently, have created imbalance and limited delivery. 
  • To solve for this, 55ip uses automation to optimize the creation and implementation of tax-managed custom models, so advisors can select solutions for every client scenario across multiple sources, investment vehicles and integrate mutual funds, ETFs, and SMAs.

To enable financial advisors to realize their business vision and client goals, custom model portfolios have become integral to their practice and need to deliver on their promise.  

Investors need – and demand – tailored solutions. Varying risk profiles, investment goals, income needs, and price sensitivity all dictate that one size most definitely does not fit all. This presents a continuing challenge that’s recognized across the industry – from the smallest regional offices to the largest wire houses, from home offices to asset managers and beyond: How does the wealth management industry deliver the sophisticated tailored solutions their clients need in a manner that balances effectiveness, customization, and scale?

The road to delivering unrealized potential  

Investment outcomes and user experience shouldnā€™t be compromised by portfolio construction and implementation constraints. Advisors should be able to: 

  1. Build a single model: Create tailored portfolio solutions from all product types including active and passive SMAs, ETFs and Funds, ESG and Factors, as well as alternative investments as differentiated sources of diversification, alpha and yield.  
  1. Automate tax management across all client accounts 
  1. Simplify the experience leveraging a unified managed account (UMA) structure.  

The need to deliver effective, customized and operationally efficient solutions with appropriate speed and necessary scale is well defined. The challenge has been solving the operational frictions that, until recently, have created imbalance and limited delivery. 

Solving the challenges, delivering the vision 

Today, custom models comprise only 9% of asset manager and third-party strategist models. While they typically exist as risk-based suites, their potential for more outcome-oriented approaches (from income generation to sophisticated tax optimization strategies) is a key component of why 57% of asset managers view custom models as a large opportunity.* The key to accessing this opportunity is to utilize automation to optimize two critical phases of the process: creation and implementation. 

Creation:

The best custom models for disparate client profiles may have to come from different starting points ā€“ advisor or home office solutions, third party providers with different specialties and so on.  Itā€™s essential that an advisorā€™s ability to create and deliver differentiated solutions are not limited by a single model provider. For example, 55ipā€™s platform was designed from day one to be provider agnostic. Advisors can select ā€œbest of breedā€ solutions for every client scenario across multiple sources.  

ā€œBest of breedā€ solutions also require that choice of investment vehicles within custom models are unconstrained. Today, 55ip can integrate mutual funds, ETFs, and SMAs to ensure that optimal solutions can be designed and delivered.  

Implementation:

Making models more tax-efficient for taxable accounts is now table stakes for the wealth management industry. Tax-loss harvesting was (and in many cases still is) a manual and therefore infrequent process, which often left harvesting opportunities unrealized. But no more. Today the ability to counter the headwinds of taxes can be turned into a competitive advantage. 

At 55ip, we enable systematic security-level tax-loss harvesting opportunities which are by definition, customized. Our automation delivers differentiated solutions and the potential to markedly enhance after-tax outcomes ā€“ often at times when they are needed most. 

Our methodology also solves for another key pain point – transitioning taxable clients into custom models from their legacy allocations. Moving to a new allocation can cause embedded gains to be realized, creating inertia or unwanted bills. With 55ipā€™s tax-smart implementation, advisors can launch an optimized transition plan in the matter of minutes versus weeks or months driving higher levels of client satisfaction setting the industry standard.  

Deliver your vision with 55ip 

As the industry moves toward the ā€œholy grailā€ solution, integrating custom model design with systematic tax optimization can deliver truly differentiated solutions and outcomes. At 55ip, we sit at the nexus of financial advisors and asset managers to make the promise of custom models a reality. Our consultative approach, capabilities and technology have made us an industry leader and invaluable partner to advisors. We ensure that the complete spectrum of investor needs can be met without compromise by delivering the balance of effectiveness, customization, and scale theyā€™ve been looking for. 

Footnotes

*Source: Cerulli US Asset Allocation Model Portfolios 2022 Report 

 

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