Why it’s time for advisors to level up their portfolio rebalancing solutions

Why it’s time for advisors to level up their portfolio rebalancing solutions

Next-generation technology can elevate advisors’ productivity with what-if scenarios, daily task mapping, portfolio alerts, and more.

Ed.: This article by Leo Almazora was published in Wealth Professional (2022). Click here to see the original page.

With so many metrics to consider – asset class weightings, risk exposures, sector allocations, desired stock positions, and more – portfolio rebalancing is an intensive process even in the best of times. Because many rebalancing tools today are manually operated, firms may try to ease some of the burden by making preparations and starting any given day with an idea of which accounts, relationships, households or sleeves need attention and why.

But according to Michael Blicker, Product Manager at Croesus, a Quebec-based provider of software as a service (SaaS) wealth management solutions, that still leaves crucial gaps and openings for human error and places huge administrative burden on firms.

“For example, if a model applied to a relationship and certain constraints or targets by asset class or sub-class are not being respected, this may require a rebalancing to targets,” he says. “But what happens if targets for securities, or targets by class or subclass, are changed during the day? Or what happens if a model is externally managed by an asset management firm, but an advisor or team is updating those model positions and targets manually using their firm’s internal tools and platforms, or a firm wants to simulate model changes ahead of committing those model changes to portfolios that it is applied to?”

According to Blicker, next-generation portfolio rebalancing systems are built to mitigate and neutralize that risk. He’ll be taking a deep dive into how advisor teams can leverage the different functionalities of these systems to elevate their capabilities at the upcoming WP WealthTech Summit.

With the capability to map pre-determined scenarios against portfolios, relationships, accounts, or sleeves, advanced portfolio management systems enable advisor teams to perform automated or semi-automated rebalancing, depending on the level of control that they would like. They would also take away a lot of the heavy lifting by mapping out daily tasks and proposing orders for the day even before the team walks into the office.

Another key benefit of using next-level rebalancing tools, he says, is being able to build an automated daily task list for portfolio management groups– a crucial consideration in volatile market environments. With the ability to define rules and set if-then contingencies, a robust rebalancing tool can respond to market volatility by calculating proposed orders within specified constraints. At the same time, it should be able to accommodate on-the-fly changes to any models used for clients’ portfolios, and alert compliance team members when portfolios drift off-target.

“Increased volatility like we’re seeing today, and will probably continue to see based on global macro conditions, means that it’s more important than ever to have pre-defined rules and conditions for portfolio rebalancing and to reduce exposure to certain asset classes where appropriate,” Mr. Blicker says.

To give finer control over the portfolio rebalancing functions, next-generation portfolio management technology also lets users identify priority areas for rebalancing within asset classes. That allows them to better articulate their preferences on how to adjust risk exposures within the client or model portfolio.

“We’re finding that more and more firms are adopting a UMH (unified managed household), separately managed account or unified managed account approach in their portfolios as well,” Blicker adds. “So we believe having a tool that’s able to reflect and consider different management approaches is increasingly crucial for people in the industry.”

To learn more about how cutting-edge portfolio rebalancing systems can help drive productivity and increase efficiency at your business, register today for the WP WealthTech Summit happening on May 17. The free-for-advisor event has been approved for 4.25 CE credits by FP Canada.


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