7 min read
2026 US Model Portfolio Landscape: Growth, Innovation, and the Future of Portfolio Construction
How scale, cost efficiency, and new asset classes are reshaping the model portfolio ecosystem.
Key Takeaways
Model portfolios’ quick asset growth shows how important they have become to financial advisors’ practices.
ETFs have emerged as the dominant building block, supported by cost and liquidity advantages.
Customization and private markets are transforming how portfolios are designed and delivered.
Model portfolios are no longer a niche solution—they are rapidly becoming a foundational tool for financial advisors. Morningstar’s 2026 US Model Portfolio Landscape report highlights how these portfolios are evolving across scale, structure, and sophistication. With assets approaching $1 trillion and innovation accelerating across ETFs, customization, and private markets, the model portfolio ecosystem is entering a new phase of maturity.
Here we’ll explore three defining trends shaping the space today and what they mean for advisors, asset managers, and investors alike.
Model portfolios’ rapid growth underscores their central role in advisory practices
Model portfolios’ quick asset growth shows how important they have become to financial advisors’ practices. Third-party model portfolio assets reached $943 billion as of March 2026, representing a 46% increase over the prior year. This growth is even more striking in a longer-term context: assets have more than tripled since Morningstar’s first survey in 2021. The trend reflects a structural shift in how advisors manage client portfolios, emphasizing scale and efficiency without sacrificing quality.
Flows into model portfolios surged in 2025, gathering $42.6 billion, up 42% from the previous year. This sustained momentum indicates that adoption is not only widespread but accelerating. The reasons behind this growth are rooted in the practical realities of advisory work. Model portfolios streamline investment processes, reduce decision fatigue, and allow advisors to spend more time on client relationships and financial planning—a fast-growing expectation of the job according to the latest Morningstar Investor Perspectives survey. As advisory firms face increasing pressure to scale their practices, models are proving to be indispensable tools.
ETFs have become the backbone of modern model portfolios
ETFs continue to dominate model portfolios. As of March 2026, ETFs accounted for an average of 55% of model allocations, up from 43% five years earlier. This shift reflects both advisor preferences and structural advantages. ETFs offer intraday liquidity and lower costs, making them particularly attractive for implementing diversified, multi-asset portfolios. As a result, they have overtaken mutual funds as the primary building blocks of model portfolios.
Importantly, this transition is not just about cost—it also aligns with how advisors want to construct portfolios. ETFs provide efficient access to a wide range of asset classes, including equities, fixed income, and global exposures, enabling more flexible and scalable portfolio designs.
At the same time, innovation within the ETF market is expanding possibilities. The growing use of actively managed ETFs within model portfolios—rising significantly from earlier levels—shows that advisors are blending active and passive strategies in new ways to meet client needs. Collectively, these dynamics reinforce ETFs’ role as the core engine powering today’s model portfolios.
Customization and private markets are reshaping portfolio design
Beyond growth and ETFs, the model portfolio landscape is evolving in ways that reflect increasing demand for personalization and diversification.
Custom model portfolios are gaining traction as advisors seek solutions tailored to their clients’ unique goals. Morningstar estimates that custom model assets reached $258 billion as of March 2026, a 40% increase year over year. This growth highlights how advisors are moving beyond one-size-fits-all approaches toward more tailored strategies.
Customization can take many forms, including fund substitutions, strategic asset allocation adjustments, and the inclusion of new asset classes. These capabilities allow advisors to combine the efficiency of model portfolios with the flexibility needed to meet diverse client needs.
At the same time, private markets are becoming an increasingly important component. Nearly 70% of firms surveyed either offer or plan to offer model portfolios with private asset exposure. Common allocations include private credit, private real estate, and private equity, often implemented through interval funds.
This shift toward private assets reflects a broader effort to enhance diversification and access new sources of return. However, it also introduces complexity around liquidity, valuation, and fees—factors advisors must carefully manage when incorporating these exposures. Together, customization and private markets are pushing model portfolios into a more sophisticated and differentiated era.
Model portfolios: From helpful tool to strategic foundation
The model portfolio landscape in 2026 is defined by rapid growth, structural shifts in portfolio construction, and expanding innovation. What was once a tool for efficiency has become a strategic foundation for advisory practices.
As assets approach $1 trillion, ETFs dominate allocations, and customization and private markets gain traction, model portfolios are evolving into highly flexible, scalable investment solutions. For advisors, this evolution offers new opportunities to deliver better outcomes while managing complexity more effectively.
Looking ahead, the continued integration of new asset classes, technologies, and portfolio design approaches will likely further solidify model portfolios’ role at the center of modern wealth management.
