Displaying items by tag: model portfolios

Advisors are increasingly adopting outsourced model portfolios as a way to streamline investment management and redirect their time toward deeper client relationships and higher-value planning work. 

Research from Cerulli shows that model users spend just over 10% of their time on investment oversight, enabling them to devote more than 60% of their time to client-facing activity and business development. The trend is especially pronounced among younger advisors running leaner practices, many of whom lack in-house investment staff and rely on models to achieve greater efficiency. 

These advisors view outsourced portfolios as a strategic tool, using the time savings to focus on complex planning, attract wealthier households, and sharpen their competitive positioning. High demand for product education, best practices, and access to portfolio managers underscores the need for model providers to keep advisors well-informed. 

Finsum: While some advisors avoid models due to concerns about customization or added fees, the overall shift highlights how outsourcing has become central to scaling a modern advisory practice.

Investors’ demand for tax-efficient investing is fueling rapid growth in separately managed accounts (SMAs), which now top $500 billion in tax-managed assets—up 67% since 2022. Unlike mutual funds or ETFs, SMAs allow investors to directly own securities, enabling personalized tax management such as loss harvesting. 

Direct indexing remains the most popular strategy, but providers are expanding into active equity and fixed-income SMAs to capture additional tax alpha. Challenges arise with active managers, since balancing loss harvesting with stock-picking discipline can dilute investment ideas, though new approaches like substitute stock lists aim to resolve that. 

Fixed-income SMAs offer fewer opportunities, but rising rates in recent years did create harvesting potential, while model portfolios are also integrating tax-aware transitions to ease client moves without triggering large gains. 

Finsum: Overall, tax-managed SMAs are expanding across asset classes and portfolio models, giving advisors more tools to reduce investors’ tax burdens.

Model portfolios are quietly transforming the wealth management industry, gradually replacing the once-standard approach of bespoke portfolio construction. More than 80% of fee-based advisors now use models for at least some assets, with trillions in AUM shifting toward this streamlined, outsourced method. 

While models bring scale and efficiency, they raise hard questions about advisor value, especially when clients can access similar portfolios at a fraction of the cost. As robo-advisors like Vanguard grow in market share, the pressure mounts for human advisors to offer more than commoditized investment solutions. 

To stay relevant, advisors must differentiate through advanced planning, alternative investments, tax strategies, and highly personalized service. 

The future of financial advice hinges not on portfolio management alone, but on the depth and breadth of the advisor-client relationship.

Tax-efficient investing is gaining momentum, with separately managed accounts (SMAs) emerging as a preferred tool for personalization and tax savings. Unlike mutual funds or ETFs, SMAs allow investors to directly own securities, enabling tailored strategies like tax-loss harvesting. 

Assets in tax-managed SMAs have surged past $500 billion, a 67% increase since 2022, with direct indexing leading the way due to its scalability and precision. Asset managers are now extending tax overlays to active equity strategies, though the process is more complex due to potential conflicts with managers’ top stock picks. 

Meanwhile, model portfolios are incorporating tax-aware transition tools to help advisors move clients into new strategies with minimal tax impact, further expanding the reach of tax management across investor segments.

Finsum: Fixed-income SMAs offer fewer tax opportunities but can still provide benefits during periods of rate volatility or credit stress.

Model portfolios have transformed from basic investment templates into versatile, sophisticated tools that support a wide range of advisor and client needs. Today, assets in model portfolios are projected to grow to $11 trillion by 2028, fueled by the rising demand for customization and outcome-oriented investment strategies. 

The most common models remain asset allocation portfolios, especially those built with open architecture, which allows advisors to incorporate both in-house and third-party managers for added diversification and cost efficiency. 

Alongside these, outcome-oriented models—such as those focused on income generation, downside protection, or tax optimization—are gaining popularity for their ability to align with specific client goals. Building block models, which emphasize a particular asset class or investment objective, also offer advisors greater control in tailoring portfolios around their core expertise. 

Finsum: As the model portfolio landscape matures, advisors are increasingly choosing providers that offer a full spectrum of solutions to enhance both operational efficiency and client personalization.