Why “model” portfolios?
In the early days of our advisory business, we created a unique portfolio for each client, based on their specific risk and reward parameters. But over a few years, we recognized that this opened the door to inconsistencies. We began to question the value we were adding through this additional “precision” in our client allocations. We came to understand that using a model-based approach creates a consistent decision framework, allowing us to avoid decision errors and mistakes at the individual account level. That said, in managing individual accounts, we do factor in individual circumstances, most notably taxes consequences and transaction costs, into every decision. By knowing our model targets we can do this more consistently and effectively.
