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The Competitive Edge: Personalized Rebalancing for the Modern Investment Advisor

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Competitive Edge

Periodic rebalances are essential to realigning portfolio positions when losses or gains in certain stocks, bonds or other investments have caused drift from desired ratios. While rebalancing exists in basic form broadly, specialized rebalancing platforms like intelliflo redblack help advisory firms go further by leveraging tailored and holistic data views to deliver sophisticated, personalized rebalancing at scale.

Streamlining multi-custodial rebalancing and household management

A household typically covers many investment accounts across a multitude of custodians. This presents several challenges, and advisors ill-equipped to manage the complexity could sacrifice investment performance.

Basic rebalancing looks only at a single account. In doing so, each portfolio that drifts at an account level may be well within tolerance when viewed in aggregate from a household perspective. Rebalancing these accounts needlessly would generate extra work for the advisor and increase trading costs for the client.

When a portfolio goes adrift at the household level, a specialized rebalancing platform can add tremendous value. Beyond showing which assets should be bought and sold across the household, the platform should also direct where these trades take place. By enabling the setting of asset location preferences, intelliflo redblack allows advisors to position buys and sells in the specific accounts that will provide the most tax benefit for the investor, all while ensuring wash sales are avoided for the household – and the entire family.

A household rebalance inevitably requires orchestrating trades across multiple accounts, most likely held with different custodians. With seamlessly integrated trading and order management functionality, intelliflo redblack optimizes trades for the household while aggregating and sending orders across a book of business to multiple custodians – one of the only rebalancers in the market to do so.

Rebalancing’s crucial role in customization and scale

Today’s portfolio management systems often lack robust rebalancing capabilities necessary to manage drift and exception processing for ultra-tailored portfolios at scale. Specialized rebalancing platforms can offer superior customization, ultimately enabling advisors to meet complex client needs efficiently.

Managing portfolios for tax optimization, ESG preferences, restrictions, and other idiosyncratic objectives has historically been reserved for the ultra-high-net-worth but is quickly entering the mainstream. It’s simply not possible for advisors to provide this level of personalization with basic rebalancing tools – there are not enough hours in the day.

By offering a wide range of configurations at all levels of the system – global, models, households, accounts, securities and more – intelliflo redblack supports hyper-personalization, enabling advisors to offer tailored services at scale across their entire books of business. Working with some of the largest financial advisory businesses in the world, intelliflo redblack can rapidly rebalance 100,000 accounts and straight-through process 250,000 orders in a single day.

One of the biggest benefits of specialized rebalancing is time back to the advisor to focus on high-value tasks for their clients and their business. Technology takes over the crucial yet time-consuming operational tasks of portfolio management, leaving advisors with more time. The ultimate competitive edge, this time can be reinvested in deepening relationships with clients and prospects – the lifeline of their business.

As the financial industry undergoes rapid growth and client needs evolve, scalable rebalancing becomes indispensable. Advisors can efficiently scale their business without jeopardizing optimal outcomes for their clients. Enhancing their processes through technology gives advisors the power to achieve both without compromise.

Inheriting books of business and methods of rebalancing

Investment managers growing their businesses through M&A face modeling and rebalancing issues when inheriting clients. They need the flexibility and scale to place numerous models with independent customizations into their managed model structure – ultimately freeing up more time for new and existing clients.

Firms also face the modern problem of over-customization. Too many customized models can be a negative. Without advanced rebalancing software, too many models may lack the ability to effectively consolidate them into more manageable building blocks.

Multi-tier models empower advisors to build advanced, top-down models with an unlimited number of tiers, helping to reduce the overall number of models while easily managing the customization of sleeves.

Integrated rebalancers like intelliflo redblack enable advisors to rebalance individual nodes and sleeves. intelliflo redblack enables firms to rebalance individual nodes and sleeves. Nodes typically represent asset classes or styles, such as equity and fixed income, or large cap and small cap. Node rebalancing allows firms to rebalance these individual components of a multi-tier model, for example, only equity or only fixed income. At the bottom tier of a multi-tier model, the nodes contain one or more sleeves, which are the security models that define the ultimate allocation to individual securities. intelliflo redblack enables the rebalancing of individual sleeves, allowing fine-grained adjustments to highly specific parts of a portfolio.

The evolution of individualized client service

More firms are now offering specialized services to address growing client needs. According to a recent EY report, the top three financial goals that clients discuss, manage, and delegate to their wealth managers include:

  • Ensuring adequate income/financial security, 51%
  • Protecting wealth (from investment loss, inflation, etc.), 49%
  • Reducing taxes, including inheritance taxes, 44%

Additionally, new wealth management trends are driving the need to meet more complex client requests. The growth of alternative investments, tailored advice to include estate and tax planning, and sustainability goals are driving the industry. One in three clients is currently investing in alternatives, and projections have the figure climbing to 48% by the end of this year. The proportion of investors using estate and tax planning is also expected to grow, from the current 30% to 44% and 45% respectively by the end of 2024, perhaps driven by the historic wealth transfer underway from baby boomers to their heirs.

Scalable trading and rebalancing to accommodate these changes and growing client needs will be critical in the years ahead. In the past five years alone, 21% of firms have engaged in M&A activity and 27% have had an advisor bring on their own book of business. There is a growing need to transition portfolios and scale to significant growth without interrupting operations, and integrated rebalancing, trading and order management platforms are a way to ensure these processes happen smoothly and are tailored to customer needs.

Future-proofing an advisory business through cloud-based rebalancing tools like intelliflo redblack can quickly scale to support firm growth for years to come in terms of users, diverse types of clients, multiple custodians, and ever-evolving complex investment strategies. As clients and their requests evolve, integrated rebalancing and trading platforms will become the competitive edge advisors need to tackle modern problems and provide the greatest value of all – more time to learn and grow from the clients that drive their bottom line.

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