Kestra Investment Management, a division of Kestra Holdings launched about a year ago, has introduced its first model portfolios, the firm’s latest move in expanding investment services to the more than 2,400 financial advisors across its business lines.
Last year, Kestra launched the new division and tapped Chief Investment Officer Kara Murphy, former CIO and managing director at Goldman Sachs Personal Financial Management, to lead it. Murphy said she and her team have been focused on three initiatives: bringing investment research and commentary to help advisors navigate the turbulent markets; adding service and support—a team of people ready to work directly with advisors; and making a series of model portfolios available to use with their clients.
“While there have always been other third party providers out there, this is the first time that there’s been something exclusively designed for Kestra-affiliated advisors,” said Murphy.
“There’s a lot of industry data out there to suggest that when advisors use models, a lot of really good things happen. They tend to grow their top line faster; they tend to have higher profitability levels; and their clients tend to have better experiences,” she said. “That doesn’t mean in every case it makes sense, and there are plenty of advisors there who don’t need a solution, and that’s OK too. But for advisor who want to spend more time talking with their clients, growing their business and not spend their days in front of spreadsheets and charts like I do, then working with a partner can be really helpful.”
The new offering includes two new model portfolio series—the “Strategic Series” and the “Dynamic Series,” and the firm will continue to add to the lineup.
The Strategic Series is meant to provide clients a diverse basket of asset classes, using exchange traded funds and low minimum investments to keep the option affordable. They’re meant to be strategic, long-term positions. For clients who need it, there is a version of the portfolio that uses municipal bonds and other tools to provide better after-tax returns.
The Dynamic Series is more active; it has a larger number of holdings, more sector or factor bets and a more frequent level of trading. It also has a tax-aware version.
For both, there are between six and seven risk profiles to choose from, ranging from 20% equities/80% bonds to 100% equities/0% bonds.
“Suffice to say, we’ve tried to be very, very cost competitive,” Murphy said. “We see this as a way of helping advisors upgrade their practice and serve their clients more efficiently, so we wanted to be able to do that in a really cost effective because it’s a really important way of helping to have better returns over time.”
Murphy said the firm has close to 100 advisors across $60 million in assets using the models.
With the markets falling dramatically this year, Murphy says many advisors will recognize the benefits of outsourcing portfolio management to a dedicated investment group.
“Our team wakes up every morning, and these investment portfolios are the only thing we think about,” she said. “An environment like this can really show the added advantage of being able to have a partner like that.”
Kestra just recently announced that private equity firm Oak Hill Capital was taking over a minority stake in the firm, previously held by private equity firm Stone Point Capital. Warburg Pincus still remains the majority owner.
