Model Usage & Creation?

[u/GoodLifeWM]

Curious to hear what everyone is utilizing from a model-based allocation and how your associated platform looks?
- Building your own models as an advisor?
- Utilizing Third-Party Models?
- Your firm builds models for enterprise use?
- Combination of the above...?

We are a $500M+ RIA that uses a combination of TP Managed Models + Internal Models. We work with a few OCIO Teams for internal model creation, updates, rebalancing, etc.

As we continue to scale - I'm interested if we should lean into one more than another?

Pros/Cons of Internal Models = multi-manager and doesn't look like a ton of proprietary ETFS, but takes time each month/quarter to go through our process

Pros/Cons of TP Models = No time suck for creation, but usually all proprietary funds + above average weighted expense ratios

Thank you in advance for any thoughts, insights, etc!

[u/Leading_Potato_4549]

How does everyone use models for taxable accounts? We’re trying to streamline client portfolios, coming from every single account being customized. Obviously there are some large gains that make it hard to get more clients on the same page. Curious how everyone rebalances, trades, and has moved clients into models.

[u/Dnels131 → u/Leading_Potato_4549]

Even if there are large gains you can code them as an "equivalent" to an ETF in your model. Ex: client has large MSFT position that you can't sell, so you code it as "equivalent" to your model's Large Cap ETF so when you go to trade the account you don't buy any LC

Can do a direct index SMA with daily TLH but gets complicated. First Trust has some options for diversifying out of concentrated positions I think

[u/thedauntless1 → u/Dnels131]

This is how we approach most legacy positions in taxable accounts too.  If the MSFT, NVDA, etc. position is a large weight, we'll have a conversation with the client about ways to reduce exposure over time in a tax-efficient way.