Launching Designer Models FAQ

FAQs for designers of models

What memberships can launch models?

Designer Models can only be launched by membership plans that offer 20Y of history and have simulated strategies.

How many Designer Models can I offer?

Please check your membership entitlements. You can also buy Add-Ons to launch more models.

Do I need to be a registered investment advisor?

Current laws in the United States require registration to give advice to specific individuals or organizations. Publicly sharing an opinion on a stock - or, in this case, a whole portfolio of them - does not require licensing. It is the responsibility of each designer to determine if their activities qualify them as investment advisers within the meaning of the law and to comply with any federal or state laws or regulations that may be applicable.

What kinds of Portfolio123 strategies may be used as Designer Models?

Generally speaking, any Portfolio123 strategy (Stock, ETF or Closed-End Fund) that is saved as a simulation can be converted to a Designer Model subject to a small number of limitations designed to support use of the strategy with live-money trading-investing. For a detailed list of requirements, see the Simulation requirements.

How should I name my models?

You can name your Designer Models in any manner you choose. However, given that your models will be presented and seen together with other models, it would be to your advantage to give them clear, reasonably descriptive and hopefully memorable names. "Fred's Top Notch Vol 250k Liq. 500k Ace ranker 15 Best" is an example of a name you may use if you wish. But in the interest of clarity, etc., you might instead prefer something like "Fred Smith's Trend-leading Aggressive Small-Caps." (Don't be shy about using your name. Having a personal brand can go a long way in helping you attract and retain subscribers.)

How do I launch a Designer Model?

A Designer Model is just a P123 portfolio in your account and its associated statistics. For more information see the Launch Instructions.

How much of a Designer Model strategy is made visible?

Holdings, scheduled transactions, and recent transactions can only be accessed by the subscribers of a Designer Model. Users who are not subscribers can only see closed trades (30 days lagged). The strategy description is provided by the designer. Since a Designer Model is simply a Portfolio123 portfolio, the normal visibility settings that you choose apply.

How do I control investment size?

This is something that is controlled by subscribers, not designers. All you can do, if you believe the liquidity of stocks selected by your model is such that trading large lots may be difficult, is to limit the number of subscribers your model can accommodate and include text in the Description of your model explaining liquidity issues and offering a recommendation as to the maximum amount of capital that should be committed to the model. Ultimately, though, you should give very serious consideration to the wisdom of pushing against the lower limits of the liquidity constraints imposed by Portfolio123 during the Launch process. No matter how restrictive you are with the number of subscribers you will accept, and no matter how persuasive your description is regarding prudent capital allocation, you remain unable to influence the activities of others on Portfolio123 or elsewhere who discover the stocks on their own and trade them, thoughtfully or not, as they wish. Your own sensibility regarding liquidity is the best protection you can get regarding the trading integrity of your Designer Models.

Do I need to rebalance Designer Models?

No. All Designer Models rebalance automatically. The rebalance recommendations are sent out on Monday to all subscribers before market open, and then updated on Monday night with intra-day prices.

Can I revise a model after it has been published?

Yes, you can make minor tweaks to your system. (Don't use revisions to make a significant changes in the model's approach.) Go to your "Launched Models" page, locate the model you wish to revise, and click on "Revise." You can do this once every six months. The platform will direct you to send to subscribers a brief explanation of the revision.

How can I terminate a model?

Go to your "Launched Models" page, locate the model you wish to revise, and click on "Remove Designer Model."

How should I determine the subscription cost for my model?

We suggest you approach pricing decisions the way any seller of goods and services does, by trying to understand your market. Potential subscribers are likely to consider your pricing in the context of those of newsletters that provide model portfolios or single-stock recommendations. Hence you should be aware of how your annual subscription price relates to this group of competitors. (See generally, the Forbes and Seeking Alpha newsletter portals.) Consider, too, how much money you think a subscriber is likely to invest in your models (bearing in mind a subscriber may spread funds among multiple Designer Models) and be aware of where your annual subscription fee stands in relation to potential subscriber assets in the model. As a matter of context, asset managers traditionally charged annual fees of 1% of Assets Under Management but recent technology-driven business disruption has often caused fees to fall to below 0.50% especially for managers who provide automated service via internet web sites, with the biggest firms going to 0.25% and below.

How can I market/promote my model?

The model itself is best marketed through a live track record. But that, by itself, may not be enough over a sustained period (though it can seem successful during intervals when your model is hot). Ultimately, your model is a monetizable aspect of your personal brand as an investor authority, so developing and promoting this is likely to have the largest most sustainable impact. Speak to people you encounter in the course of your life, try to make the sort of impression that will warrant your being invited to speak to local investment clubs and groups, and blog. Seeking Alpha is a terrific platform for this sort of thing. (Note, though, that generating page views can be a challenge. Toward this end, you may want to focus on actionable recommendations, pro or con, on widely-followed stocks based on the kinds of ideas and data characteristics that drive your models. This will give you a non-pedantic way to get readers comfortable with the way you and by extension, your models, pick stocks.)

How can I make others comfortable with my strategy without opening up the "black box;" without giving away my secret sauce?

The art of model description is best learned by example and practice. For starters, refer to descriptions of some Designer Models posted by Portfolio123; "Designer Model Equity Income," "Underestimated Blue Chips" and "Low Volatility Select - SP 500." You can go further by screening on Portfolio123 for Equity ETFs whose methods are classified as Quant (ETFAssetClass=EQUITY and ETFMethod=Quant). Go the fund web sites and open the Summary Prospectus. Look at the section that describes the Principal Investment Strategies; in some cases, you'll see a subsection describing the Index the fund is tracking. Notice which ones make you, as a potential investor, more comfortable and those which leave you unsatisfied.

What, if anything, can I tell prospective subscribers about simulated performance?

We very strongly recommend that you refrain from discussing any numerical information beyond what is shown on the Designer Models platform. Professional Investment Advisers are governed by very strict limitations on such discussions, and everybody is governed by general principles of law relating to deception. The harshest judge however may be in the court of subscriber opinion. Do not set yourself up in such a way as to cause subscribers to believe you have made promises you cannot or did not keep. The more you discuss your simulations, the greater your risk of running afoul of this since regulators are absolutely correct when they express the view that past performance does not assure future outcomes.

My real-money track record is very short: Do I have to sit on my hands for a year or more and wait, or are there things I can do right now?

Track records are important and there is no way around the fact that they take time to develop. However, starting on day one, you can and should develop and refine your presentation of yourself as an investment authority so that by the time you accumulate what potential subscribers deem a reasonable track record, they'll be able to attach it to a personal brand. This involves doing what we suggested under the FAQs relating to marketing/promotion and description of your strategy without opening the black box.

How should I respond to subscriber inquiries?

First and most important, be truthful. Beyond this obvious requirement, avoid addressing the subscriber's individual situation; that is the province of a duly registered investment adviser who has a professional relationship with the questioner. Keep your focus on the characteristics of your model, including, if relevant, the impact of economic or market events on performance, and leave it to the other parties to assess its suitability for themselves.

Can/should I communicate with subscribers without waiting for them to ask questions?

Yes, and in fact, you have the ability to email subscribers (go to the "Email Subscribers" tab of your "Designer Dashboard"). Doing so to share your views on reasons for the performance of your models can reinforce a relationship between you (your brand) and your subscribers and and improve prospects for subscriber retention. These communications are limited to 1,500 characters. If and when you want to say more, set up a personal blog and link to more comprehensive content you post there.

My succesfully-tested model turned sour after I published it: What went wrong? Should I terminate it?

Not necessarily. Even the best of strategies cannot be expected to beat the market at all times. The major consideration in your decision to keep or terminate a lackluster-performing model should depend on whether the model is performing as it should in light of market conditions. For example you should expect a low-volatility model to underperform a vigorous rally and ought not terminate such a model when it does just that. On the other hand, you should consider going back to the drawing board if a low volatility model is at its worst in down market but outperforms the strong uptrends.

Are there things I should avoid saying to subscribers?

"Guarantee," "Absolutely," "Promise," "Assure," "Definitely." And don't utilize clever phrasing to try to subtly imply any of these ideas. Designer Models address future performance and expressions such as those cannot be used in connection with the unknowable future. In addition, unless you are a duly registered professional adviser who has a clearly established professional relationship with a subscriber, you should avoid saying anything that addresses the subscriber's individual situation; speak in terms that are applicable to the public in general.