The one-page model description: what every model portfolio at a small RIA should have written down
Every model portfolio a small RIA runs should have a one-page description covering its objective, target allocation and allowed ranges, benchmark, rebalancing rule, the kind of client it suits, its current version and effective date, and who approved it. Keep earlier versions, link each client's IPS and account to the model version they follow, and update the page whenever the model changes.
Ask a small-firm advisor to describe their Growth model and you'll get a good answer. Ask for the written version and you'll often get a spreadsheet tab with target weights and nothing else: no benchmark, no rebalancing rule, no date. That's fine until someone else needs to understand it, such as a new advisor, a compliance consultant or a reviewer.
What goes on the page?
| Section | Example |
|---|---|
| Name and version | Growth, version 4 |
| Effective date | 1 April |
| Objective | Long-term growth for clients with horizons of 10 years or more |
| Target allocation and ranges | Equities 80% (75 to 85), bonds 17% (12 to 22), cash 3% |
| Benchmark | The blend the model is measured against |
| Rebalancing rule | Quarterly, or when any asset class leaves its range |
| Suits | Clients with long horizons and higher tolerance for ups and downs |
| Doesn't suit | Clients needing regular withdrawals in the next few years |
| Approved by | Name and date |
| What changed from the last version | One or two lines |
How does it connect to everything else?
- Each client's IPS names the model and version, or describes how the account differs.
- Each account records the model it follows and from when.
- Trades are linked to the model version they implement.
- Reports compare against the benchmark on the page.
A worked example
Take a hypothetical two-person RIA with four models and only target weights written down. The advisor spends an afternoon writing a page for each: objective, ranges, benchmark, rebalancing rule, who each suits. Two discoveries come out of it: two models have nearly identical allocations, and one has no benchmark the firm has ever used consistently. The two similar models are merged with a dated note, and the missing benchmark is chosen and written in. Every page now carries a version and date.
What are the common gaps?
- Target weights with no ranges or rebalancing rule.
- No benchmark, or a different one in every document.
- No version or date, so you can't tell which description applied last year.
- Old versions overwritten.
When is this overkill?
It isn't, for any model with accounts on it. Even a single model deserves a page.
How Advorra fits
Advorra keeps versioned model portfolios with their rebalancing rules, philosophy and benchmark chosen from a catalog of 147 indices, and each account's dated strategy of record, so the model description and the accounts following it stay connected. IPS documents fill from the strategy. See the product page, or read about how many models to run and benchmarks for model portfolios.
One thing to do this week: write the one-page description for your largest model, and see what's missing.
A documentation template, not investment advice. Figures are illustrative.
Questions advisors ask
Who is the model description for?
Mainly the firm: advisors, anyone who trades, your compliance consultant and anyone reviewing your records. A plain version can also help explain a model to clients.
How detailed should it be?
One page. If it needs more, the model may be too complicated, or the detail belongs in your investment procedures.
Should it list specific funds?
Many firms list current holdings or asset-class targets. If you list funds, update the page when they change.
How often should it be updated?
Whenever the model changes, and checked at each scheduled model review.
Is this investment advice?
No. It is a documentation template.
See it on a demo firm
Advorra is practice software for independent RIAs: clients, models, IPS, billing and compliance records in one place, on top of the custodian you already use. Built by The CollabHub.
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