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Friday, March 23, 2018

A Super-OSJ Preps Its Models For Cetera's Platform

Reported by Neil Anderson, Managing Editor

The investment committee at an expanding, super-OSJ affiliated with Cetera Advisors is prepping model portfolios for the broker-dealer's platform. Watch for the committee to add another member and more strategies down the road for the $2.3-billion, 45-advisor super-OSJ.

Baton Rouge, Louisiana-based Horizon Financial Group's model portfolios will be implemented for trading and execution on Cetera's platform within the next 60 days, Jesse Hurst of Impel Wealth Management tells MFWire. Hurst is a Horizon-affiliated financial advisor based in Akron, Ohio, and he helped create the super-OSJ's multi-office, four-person investment committee last year.

"We're in the process of implementing those models across Cetera's trading platforms," Hurst says.

Hurst clarifies that, although the models will be on Cetera's platform, they will only be available to FAs who affiliate with Horizon.

Horizon's models are built out of ETFs, index funds, and institutional shares of active mutual funds. They come in four major risk profiles: conservative, with 25 to 35 percent in stocks; balanced, 45 to 50 percent; moderate growth, 60 to 65; and growth, 75 to 80.

"We originally talked about having an aggressive model," Hurst says, but most of their clients are between 55 and 80 years old so they decided "not to put the time and effort into it."

From the different risk levels, Horizon then divides the model portfolios even further, Hurst says:
For each of those four models, we have three different model portfolios: a slightly higher beta, growthier version of each of the models for clients that are in the accumulation stage of life; then we have a slightly lower beta, higher dividend version for clients that are in retirement ... and then we have a small account model.

The small account models hold six to eight funds each, while the other models hold 14 to 16 funds each. Hurst estimates that the portfolios are built primarily out funds from eight to ten mutual fund companies and three or four ETF companies. Those fund firms include: Capital Group's American Funds, BlackRock, Fidelity, Invesco, MFS, and Vanguard.

"That [list] changes very slowly," Hurst says, adding that the committee rarely looks for fund firms to add. "That's a pretty high bar to get over at this point: having a really unique product, or really unique research insights."

"You could literally spend all day every day meeting with product vendors," Hurst adds. "We try to be really careful to work with the people that we know we like ... We're not looking to add more."

Horizon's investment commitee talks monthly and discusses possible changes to the portfolios, with different members reporting to the group on findings of different fundamental and economic research teams. Looking ahead, Hurst says, the investment committee "would love to maybe add a fifth person," someone with "more of a specific background in technical analysis to complement the fundamental analysis" of the current committee members.

More model portfolios might be in the cards, too.

"We may look to add some specific tax-managed strategies down the road," Hurst says.

Hurst, who has been in the business for 30 years, has built preferred funds grids and model portfolios for decades. He aligned with Horizon last year, and both he and Horizon brought their own sets of models to the table. From there the new investment committee created Horizon's model portfolios.

The model portfolio rollout on Cetera's platform comes as Horizon CEO Pete Bush is trumpeting a multi-year expansion plan, including on the 401(k) plan advisor (KPA) side of the business, to boost Horizon to more than 100 FAs. 

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