‘Providing the cake’: Model portfolios linked to greater cost satisfaction

According to State Street’s Model Portfolios: Adaptive Solutions for Advisory Growth report, this year marked a rise in the number of Australian clients with investments in model portfolios, with 84 per cent saying they were utilising these portfolios in 2024 compared with just 56 per cent in 2019.

With the awareness of model portfolios increasing considerably, from 47 per cent of Australian investors in 2019 to 67 per cent in 2024, Australians are now considerably more open than US investors to holding assets in model portfolios.

As recent years have seen global market volatility and advisers increasingly strapped for time, model portfolios have allowed clients to reap the security benefits of a diversified investment portfolio while also reducing the time burden on advisers.

Notably, the report found that Australian investors with assets in models are more satisfied with the fees they pay for the value of services they receive, with 73 per cent of those who are in model portfolios indicating as such, compared with 55 per cent of those who aren’t.

State Street Global Advisors’ head of model portfolios EMEA and APAC, Kathleen Gallagher, said there are a number of benefits driving Australians towards this particular asset type.

“With more than half of Australian financial advisers now using managed accounts, it’s great to see the benefits are transcending to investors. As many Australians face the cost-of-living crunch, investors say lower fees is a key benefit of having their assets in model portfolios,” Gallagher said.

Tim Bradbury, head of intermediary, Australia, noted that model portfolios not only benefit clients, they also allow advisers to reduce time and costs associated with the provision of advice.

“Australians are expecting their advisers to take a more holistic approach to deliver comprehensive, personalised financial advice that includes planning for life goals, accumulation, income, tax efficiency and risk management,” Bradbury said.

“Advisers that use managed accounts have reported that they, or their support staff, save, on average, 22.8 hours per week. Model portfolios empower advisers to optimise their time, allowing them to focus on providing holistic guidance, which is the most important to their clients.

“Advisers are creating additional efficiencies through providing model portfolios to their clients on investment platforms. The powerful combination of this technology, coupled with model portfolios, is a key evolution in providing investment solutions and advice cost-efficiently.”

Gallagher further stated that the use of these “ready-made solutions” can free up a considerable amount of time for advisers, allowing them to spend less time on administrative tasks and more in front of clients.

“Model portfolios are transforming the way financial advisers in Australia serve their clients. By leveraging ETFs as building blocks, financial advisers are now offering ready-made solutions that fully optimise portfolio management and compliance work – similar to providing the cake for investors, rather than just the ingredients,” she said.

“This approach not only provides meaningful and efficient investment strategies, but also means financial advisers can spend more time on what matters most – building stronger client relationships.”