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        Model Portfolio Education

        What is a Model Portfolio?

        2.5 min read

        A model portfolio is a collection of assets that can be attributed to an investors portfolio and continually managed by professional investment managers. Model portfolios employ a diversified investment approach to target a particular balance of return and risk or portfolio objective.

        There are two main ways to access a model portfolio. Firstly, a Practice can select a fully outsourced approach whereby the model is built and managed by platform providers and third party providers such as institutional investment managers. Alternatively a Practice can adopt a ‘do it yourself’ approach of using their own financial service licence to offer model portfolios.

        Regardless of the approach, all model portfolios hold an advantage over traditional unitised investment vehicles because the individual assets are not collectivised and can be directly owned by the clients.

        A Win For You and Your Clients

        Models are designed to address a variety of investor needs and have the potential to:

        • Free up time allowing model portfolio users to save time, and reallocate their energy to cultivate relationships and grow their practice.
        • Diversify clients investments in an easy-to-use and easy-to-understand package.
        • Reduce investment management costs and taxes when using low-cost, tax-efficient exchange-traded funds (ETFs).
        • Benefit from access to institutional investment management with deep asset allocation and research expertise.
        • Optimise client tax outcomes with transparency of underlying assets.
        • Reduce administrative burden while adhering to regulatory and compliance requirements.

        Understanding Managed Accounts

        Typically, Australian investors access model portfolios via managed accounts. Managed accounts is the general term that refers to the type of product or service where the underlying securities can be attributed to the end investor.

        Managed accounts can be implemented in different structures, creating flexibility for the model portfolio users. Variations include separately managed accounts (SMAs), managed discretionary accounts (MDAs), unified managed accounts (UMAs) and the more bespoke individually managed accounts (IMAs).

        SMA

        In simple terms, an SMA is a financial product consisting of underlying financial investments. It is a non-unitised managed investment scheme governed by a constitution and offered under a product disclosure statement. The product issuer is legally responsible for the trading, custody, and account level administration.

        MDA

        MDA refers to a contractual relationship between an Adviser and client where the Adviser obtains continuous discretion to manage and implement client portfolios. Unlike an SMA, an MDA is classed as a service agreement rather than a financial product, with the planner authorised to provide both advice and discretionary investment management within parameters agreed to by the client.

        An MDA licence can be attached to the dealer group’s licence. Advisers can also use a third party’s MDA licence not related to the dealer group, whereby the third party retains all risk in relation to the MDA.

        UMA

        A UMA is an integrated view of an account that includes multiple investments such as equities, cash, SMAs, ETFs, managed funds and term deposits. Seen as a reporting solution for Advisers, a UMA is reliant upon data feeds and client authorisation to receive all client investment holding data. This one view can support efficient management of a client’s portfolio.

        IMA

        An IMA is a model portfolio tailored to a specific client’s needs, therefore the portfolio is managed at a client level. Generally this structure is offered under an unregistered scheme with high minimum investment requirements, therefore wholesale investors are the typical investor.

        More on ETF Model Portfolios

        Issued by State Street Global Advisors, Australia Services Limited (AFSL Number 274900, ABN 16 108 671 441) ("SSGA, ASL").  Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia · Telephone: 612 9240-7600 · Web: www.ssga.com. 

         

        SSGA, ASL is the Responsible Entity and the issuer for the State Street Managed Funds, which are unquoted, and the SPDR® ETFs which are quoted on the AQUA market of the ASX or listed on the ASX. SSGA ASL is the AQUA Product Issuer for the CHESS Depositary Interests (or "CDIs") created over interests in the SPDR® S&P 500® ETF Trust (“SPY”) which were first quoted on the AQUA market of the ASX on 13 Oct 2014. State Street Global Advisors Trust Company (ARBN 619 273 817) is the trustee of, and the issuer of interests in, the SPDR® S&P 500® ETF Trust, an ETF registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940 and principally listed and traded on NYSE Arca, Inc. under the symbol "SPY".

         

        This material is general information only and does not take into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. You should seek professional advice and consider the product disclosure statement, available at ssga.com, before deciding whether to acquire or continue to hold the Funds. Target Market Determinations can also be found at ssga.com.  This material should not be considered a solicitation to buy or sell a financial product or security. 

         

        Investing involves risk including the risk of loss of principal. Diversification does not ensure a profit or guarantee against loss.

         

        Risk associated with equity investing includes stock values which may fluctuate in response to the activities of individual companies and general market and economic conditions.

         

        ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETF’s net asset value. ETFs typically invest by sampling an index, holding a range of securities that, in the aggregate, approximates the full index in terms of key risk factors and other characteristics. This may cause the fund to experience tracking errors relative to performance of the index.  

         

        SPDR®, Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC, ASX® is a registered trademark of the ASX Operations Pty Ltd], these trademarks have been licensed for use by S&P Dow Jones Indices LLC and licensed for use for certain purposes by State Street. MSCI indexes are the exclusive property of MSCI Inc.(“MSCI”). MSCI and the MSCI index names are service mark(s) of MSCI or its affiliates and have been licensed for use for certain purposes by State Street.  The products referenced herein are not sponsored, endorsed, sold or promoted by any of these third party entities and none of these entities bear any liability with respect to the products or make any representation, warranty or condition regarding the advisability of buying, selling or holding any products issued by SSGA, ASL.

         

        There is no representation or warranty as to the current accuracy of, nor liability for, decisions based on such information.

         

        The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA ASL’s express written consent.

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