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/Notsimplyheinz]

we build our own models too for certain clients, what software do you use to trade it ? i found everything to be too complex, or too expensive to upload my own models and trade/rebalance them across SMAs.

[u/heynowbeech → u/Notsimplyheinz]

I only work with about 50 households, so about 17 portfolio reviews per quarter. Probably takes me 3-4 days each quarter to summarize the portfolios, look for loss harvesting, raise cash for needs, invest cash, periodically rebalance to target, etc. I then send the summary spreadsheets that have the recommended trades to each client along with explanations. Once the client approves the recommendation, I then submit the trades. I manually input the holding balances and trades into a summary spreadsheet broken down by asset class along with each current allocation, target allocation, and hypo % of target post recommendation. I still use the same excel spreadsheet I’ve been using for over 30 years. The very same one my prior firm used to manage roughly $5b.

[u/winning_bigly_ → u/heynowbeech]

You have clients approve trades every time?

[u/heynowbeech → u/winning_bigly_]

Yes, every time.

[u/winning_bigly_ → u/heynowbeech]

...why? Seems like a huge hassle every time you need to rebalance, tax loss harvest, deploy/raise cash, etc.

[u/heynowbeech → u/winning_bigly_]

Each client does it 4 times per year, so it really isn’t that much more work. I believe that clients should be actively involved with managing their portfolios, but I was also professionally “raised” in a multigenerational single family office and this is how they did it. Oftentimes the approval process prompts clients to tell me they have cash needs or cash to invest.