Tom Flynn, Divisional Director, National Sales – North America Advisor and Intermediary Solutions for Russell Investments, joined Keith Black, Managing Director of RIA Channel, to discuss the history of the RIA market and the demand for institutional-quality model portfolio solutions.
As the RIA industry continues to evolve, a bifurcation has emerged between the mega RIA firms that grow through M&A and more nimble RIAs, where decisions are made at the local level. The multi-billion-dollar RIAs tend to have centralized operations and investment management functions. Russell Investments’ national accounts team works with these large firms at the home office level, much like a broker-dealer. Regional teams engage with various locations of firms where decisions are made at the local level.
Russell Investments is one of the largest institutional pension consultants, having pioneered that business in the 1960s. In 1985, Russell created model-based portfolios for the retail market. The largest RIAs deploy institutionally based model portfolios for their clients, offering lower minimum investments.
Over the next 20 years, wirehouses and broker-dealers entered the model space, while RIAs shifted toward customized portfolios, allowing advisors to control the investment process. Today, RIAs want model-based portfolios that can be customized. Today, Russell partners with large RIAs to create a white-labeled outsourced chief investment officer (OCIO) model. Smaller RIAs can use off-the-shelf models.
Russell offers passive and active SMA platforms. Passive solutions include total portfolio direct indexing, covering US and global stocks, style-based portfolios, and fixed income. Multi-manager, multi-style active SMAs enable Russell’s scale, leverage, and manager research, allowing RIAs to focus on the client experience. This functionality can also be used to power active ETFs, which serve as building blocks for assembling complete client portfolios.
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