Are Only 7% of Advisors Equipped for Portfolio Management?

A study published in October by Cerulli Associates, a Boston-based research and consulting firm, found that only 7% of financial advisory practices were suited to do their own research and portfolio construction/management. Yet, according to the same study, 62% of advisors are in fact performing these functions on behalf of their clients. We do not necessarily agree with the assertion and prefer to frame this conversation in the context of fiduciary responsibility and best practice.


Does the Expense Math Work?

DcVausFV0AEXfDqBefore going further, Cerulli is a consulting firm and they describe things in a wonky way. For example, Cerulli defines Optimal Non-Users, or advisors that do not use model portfolios in favor of performing their own portfolio management, in the following manner: 

Baseline criteria to be considered an Optimal Non-User of centralized models is a team-based environment, staffed appropriately with layers of stakeholders and asset-gatherers supported by the resources needed to customize portfolios, retain existing relationships, attract new clients, and build rapport with families’ beneficiaries and outside advisors.

In other words, your team must be large enough to support all of the requisite staff that would allow for a vibrant and successful investment process. How large, you ask? Cerulli finds that firms should have at least $250 million in discretionary AUM and an average account size greater than $2 million to justify the expense. However, Cerulli acknowledges that firms  providing true customization are more likely to be north of $500 million AUM. These findings are consistent with our own anecdotal evidence as we often encounter firms that hit resistance around the $150-250 million AUM range and must retool their investment approach in order to grow further.


Focus on Where You Add the Most Value

Much like the automobile industry over the last 30 or 40 years, the financial advice industry is retooling itself to face a future client that does not look like the ones of the past. Remember the dearly departed Oldsmobile tagline ‘this is not your father’s Oldsmobile’? That brand did not make it ultimately, but arguably all cars are much better built and technologically superior thanks to the outsourcing of parts and components to firms specializing in that element of the process.

This analogy applies to financial advisors. The most important and valuable use of your time is to work with your clients on developing and executing their financial plans and the behaviors necessary to ensure they stick to it. Whether or not you picked a hot mutual fund or allocated to a unique ETF will mean less going forward.


Capabilities and Expertise Matter

This study is alarming on the surface and invites the questions of what it really means to be a fiduciary. Are those firms providing portfolio construction services without having the appropriate resources to do so really complying with a fiduciary standard? We don’t want to beat a dead horse on this topic and, as an outsourced asset manager to financial advisors, we’re not here to talk our book either. We just know that the elite advisors we currently serve have a keen focus on their core strengths and capabilities, and leverage partners where they need support.


Elite Advisor Behavior

In general, our client base of financial advisors tends to be planning-focused, more tech-savvy, and very entrepreneurial, as many either started independent or broke away from big wirehouses. We have found repeatedly that this type of advisor is usually more receptive to outsourcing their asset management functions than the less planning-focused advisor that is more accustomed to primarily selling investment performance.

So, while we found the headline of the Cerulli study to be a little jarring, the data continues to point to a similar conclusion; the environment for advisors to position their businesses to scale with the help of an outsourced asset manager has never been better. And retooling your business to serve the client of the future has never been more necessary.


Selfishly that’s good for us. Even better, it’s great news for Main Street investors.


For more thoughts on ways to evolve your investment approach and reduce the impact of human behavior on investment decisions visit

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Past performance is not indicative of future results. The material above has been provided for informational purposes only, and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed, and Blueprint Investment Partners makes no representation or warranty as to the accuracy or completeness of the information, which should not be used as the basis of any investment decision. Information contained on third party websites that Blueprint Investment Partners LLC (“Blueprint”) may link to are not reviewed in their entirety for accuracy and Blueprint assumes no liability for the information contained on these websites. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from Blueprint.  For more information about Blueprint Investment Partners, including our Form ADV Part 2A Brochure, please visit or contact us at (800) 704-6913

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