A recent report by Cerulli Associates reveals that model portfolios managed by the firm's chief investment officers consistently outperform those managed by the firm's individual advisors.
According to Cerulli, home offices achieved higher annualized returns than advisors over the past three, five, and ten years, based on their review of managed account programs from 2013 to 2022. Between 2019 and 2022, centralized models exhibited an average annualized return of 1.81%, while their advisor-led counterparts only recorded 1% returns.
Looking at the five-year and ten-year performance, home office discretionary portfolios outperformed advisor-led portfolios, delivering annualized returns of 4.45% and 11.91%, respectively. In comparison, advisor-led portfolios returned 3.33% over five years and 11.82% over ten years. The analyzed portfolios comprised various strategies, including domestic and international equities and bonds. It is essential to note that Cerulli's calculation excluded changes in asset flows.
According to AdvisorHub, Cerulli's report is unlikely to discourage advisors from managing their portfolios independently. Firms are cautious about seizing too much control, fearing the advisors might leave. However, to mitigate risks, they have adopted a dual approach, offering incentives like automatic rebalancing tools and additional services to support advisors who manage their portfolios.
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