Many financial advisors were caught scrambling in March as the pandemic took hold in the United States and, like many of us, they had to find new ways to balance their personal and professional lives. As business continuity plans quickly went into full effect, some advisors seemed to be a step ahead of their peers based on their use of strategist portfolios. We asked Brooks Friederich, Director of Research Strategy for Envestnet | PMC, to discuss the role of strategist portfolios in helping advisors more easily navigate the coronavirus pandemic, based on Envestnet’s own data and anecdotal observations.

While some media outlets have indicated that the adoption of strategist portfolios was in lock-step with our nation’s collective shift to more remote ways of doing business, that was not the case for a large majority of advisors within the Envestnet ecosystem.

Prior to COVID-19, many advisors (especially those within the insurance and independent broker-dealer channels) were already outsourcing to third-party model managers through our Fund Strategist Network. If anything, the pandemic has shed light on the power and benefits of this practice.

Advisors using our Fund Strategist Portfolios (FSP) have reported the ability to maintain focus on their clients. As they were adjusting to a new routine—responding to client concerns, setting up video conference calls, and focusing on business operations—the FSP manager was continuing to work behind-the-scenes, 24/7. Other advisors, however, have found themselves juggling time between managing client relationships and determining asset allocation or which mutual fund or ETF to trade that day.

The power of an FSP is much more than combining a few mutual funds or ETFs together within a model. By outsourcing and incorporating FSPs into your practice, the asset manager takes on key areas of execution, while providing a number of additional benefits as well:

Through our discussions with advisors over the course of the summer, the three most-commonly cited benefits of an FSP were:

  1. Active rebalancing through market volatility.
  2. An investment rationale for portfolio positioning and market outlook.
  3. Access to insightful thought leadership.

We’ve also found that advisors aren’t just leveraging the FSP manager to build and manage the asset allocation, they are turning to their FSP partners for help beyond investments—just as clients are turning to their advisors for help beyond investments. Our research shows that investors are craving personalized attention, empathy, and communication. More than ever, advisors need to find ways to leverage technology to automate routine tasks and offer more holistic capabilities while enhancing client relationships. FSPs have shown their value through this pandemic, and we will be interested to track and report on future results as we move forward.

Brooks Friederich, Director of Research Strategy

Mr. Friederich serves as Director of Research Strategy at Envestnet | PMC and is responsible for leading the firm’s efforts on Envestnet’s Fund Strategist Portfolio (FSP) research and due diligence. He also serves on PMC’s Investment Committee.

In addition to his leadership role on FSPs at the firm, he provides research and analytical support to PMC’s consulting and portfolio management groups. Mr. Friederich has been a member of the PMC Research Team since 2008, having historically performed manager research and due diligence on separate accounts, mutual funds, and ETFs across a multitude of traditional asset classes.

Prior to joining the firm in 2008, Mr. Friederich was with Pitney Bowes, Inc., where he served as an Investment Specialist on the firm’s multi-billion dollar domestic and international pension investment portfolios. He holds a BS degree in Finance from the University of South Dakota and a MS in Finance from the University of Colorado at Denver.

The information, analysis and opinions expressed herein are for informational purposes only and do not necessarily reflect the views of Envestnet. These views reflect the judgment of the author as of the date of writing and are subject to change at any time without notice. Nothing contained in this piece is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type.

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