Transitioning to a models-based practice not only helps your financial practice, but it can also improve the client experience as well.

How? First and foremost, all clients who have the same investment objective will enjoy the same performance — since they’ll all be in the same financial model. Consistency is always a good thing for clients. Plus, because you’ll be spending less time managing portfolios, you’ll have more time to spend with clients and provide additional in-depth planning services. 

If you’re transitioning clients into models from more customized portfolios, there are some key strategies you can use to communicate your strategy shift and the benefits they’ll enjoy.

Focus on investment changes for existing clients

The term “model” is industry speak, and clients can misunderstand its meaning and implications, so it’s helpful to avoid it if possible. When moving clients into a model from a customized portfolio, instead of highlighting a change in overall approach, focus on the investment changes they’ll see — because that’s what matters to them.

“We’ve found that even when advisors have custom models for each client, those with the same investment objective don’t tend to look that different,” says Jason Nicastro, vice president of Product Management at LPL. “So it’s usually not going to be a wholesale change for the client — more minor adjustments that can be addressed like any other portfolio update.”

Your clients are probably used to seeing minor investment changes in their portfolio already, so this likely won’t be anything new for them. When explaining the reason for the change, discuss your intent to focus on a pool of investments that you believe have the best options and ideas. 

Advisor and client working at table with laptop

If you do want to introduce the model concept, refer to the benefits of the institutional process — putting your best ideas into a handful of models that address your client’s primary investment objectives. You can explain that doing so allows you to continually research all of the funds you use and ensure they’re performing as expected. Your in-depth knowledge will allow you to ensure the investor’s portfolio is running as it should while best positioning them to work toward their goals.

This may also be a good time to discuss your value proposition and the other services you’ll be able to provide by using models.

Focus on your process for new clients

When walking new clients through the portfolio you’ve selected for them, again, stay away from using industry “model” speak, and focus instead on your process.

Highlight how you research and build a portfolio that targets their needs and goals. Describe:

  • Your investment philosophy and perspective on portfolio allocation
  • How you narrow the universe of investments
  • How you use investments to create a diversified portfolio
  • Your process for analyzing a client’s goals and risk tolerance to determine which allocation is right for them

By explaining your complete process that shows alignment between their goals and your portfolio, clients will likely feel secure knowing you have their portfolio in hand.

An advisor’s perspective

Financial advisor Matthew Richmond of Richmond Investment Services has been running models since joining LPL Financial 14 years ago. Richmond uses Riskalyze to introduce his models to clients, first entering the information they provide and walking them through the risk questionnaire.

“We’ll then have a conversation about risk versus reward, rather than returns,” he says. “Based on the results of the questionnaire and our conversation, I’ll determine which of my models make sense for them.”

Matthew feels his process is fairly straightforward, but he gets great feedback from clients.

“Clients are blown away by it,” he says. “I believe it’s because they see I have a process and an understanding of what I expect from my portfolios. That’s all clients want — to know you have a methodology and a plan. From what I’ve experienced with clients walking in, they’re not getting this elsewhere. They’ve always seemed relieved to know everything I do is very calculated and measured.”

Financial Advisor Matthew Richmond


The process drives results

As Matthew notes, clients want to know and understand your process — how you design a strategy that will help them work toward their goals. Whether that end portfolio is a model or has small tweaks to customize it to them will likely be less important in the end. But by using models, you may be able to offer your clients more services, which will likely increase your value to clients and help grow your relationships with them.

Previously in the models-based practice series

For more on a models-based practice, LPL advisors can access the whitepaper, "A New Model for Today’s World,” posted to the Resource Center.


This material has been created for a Financial Professional audience. The content is designed for licensed financial professionals and may not include the level of detail, explanation and disclosure needed for a general audience to accurately evaluate the facts.