Interactive Brokers says it now provides a tool that lets financial advisors create ‘virtual’ mutual funds.
Here’s how the online discount service’s chairman Thomas Peterffy described the process on the company’s second quarter earnings conference Tuesday afternoon (July 17, 2012):
Our model portfolio tool is our latest innovation for financial advisors, which we have just launched this year and it incorporates valuable feedback from our most effective advisor clients in this development.
This technology allowed advisors to create virtual in-house mutual funds by grouping instruments into models, based on specific investment strategic criteria and to invest client funds into this advisor constructed models. By simply trading the assets in the model, the advisor avoids having to trade for multiple client accounts separately.
We also believe a unique feature of our model portfolio technology is that our models can have dynamic or static target percentage allocations. Certified IB customers serve as our most successful marketing too even more so than our print and media efforts.
Here’s how it is described on the IB website:
A Model Portfolio is an advisor-constructed group of financial instruments similar to a mutual fund that the advisor funds and trades on behalf of his clients. Model Portfolios offer an efficient, time-saving tool that facilitates a more organized approach to investing client assets. Models allow Advisors to create groupings of financial instruments based on specific investment themes and invest client funds into the Model, rather than taking time to invest in a single instrument. Model Portfolios simplify the tasks of managing and investing multiple client accounts by allowing advisors to:
• Manage multiple trading strategies for each client without requiring their clients to open multiple IB accounts.
• Quickly and automatically allocate investments from multiple client accounts into a single Model.
• Spend more time focusing on client services and less time making individual trades.
Use Model Portfolios like mutual-funds but without the tax considerations of mutual funds.
And here is a review of an online service IB also offers, that is based on Modern Portfolio theory and lets individuals become their own personal financial advisors.