70%
of Advisors offer Model Portfolios
Models, Alternatives, and ETFs: What 2026 Trends Mean for Advisors and Asset Managers
New research reveals how model portfolios, alternative investments, and Exchange-Traded Funds are reshaping strategy for advisors—and the asset managers who serve them.
The 2026 Morningstar Advisor Survey reveals a clear shift in how portfolios are constructed, delivered, and scaled—shaped by the growing role of model portfolios, expanding Exchange-Traded Fund adoption, and the selective integration of alternative investments.
Across the industry, advisors are moving toward more standardized, model-driven approaches to portfolio construction, driven by the need for greater efficiency, consistency, and scalability in investment management. Advisors continue to balance scale with customization, adapting models to meet specific client needs while incorporating ETFs as core building blocks and turning to alternatives to enhance diversification and portfolio outcomes.
For asset managers, these trends signal a parallel transformation. Asset managers’ success increasingly depends on delivering flexible, ETF-centric solutions that support scalable model portfolios while addressing ongoing demands for customization, transparency, and ease of use.
Together, the findings highlight a new theme in portfolio construction. Let’s take a deeper dive into the research:
Model Portfolios are Becoming Core Infrastructure
Most advisors now offer model portfolios, reinforcing their role as a core component of modern portfolio construction. However, advisors who avoid models cite customization preferences and lack of control as their primary concerns. Higher costs, lack of flexibility, and performance consistency continue to act as secondary barriers.
Model adoption is reshaping asset allocation, particularly reducing reliance on individual stocks while increasing the use of ETFs and alternatives.
Advisors are also shifting toward outsourcing, with more relying on standardized model portfolios rather than customizing each portfolio individually.
Risk-based models remain the most used, but advisors are narrowing their model mix. Many had significant drops in usage from 2024 including, strategic allocation and blended active/passive models.
Why Models Are Gaining Ground
Efficiency is the primary driver behind model portfolio adoption, enabling advisors to streamline portfolio management.
Reasons Advisors Offer Model Portfolios
51%
efficiency in portfolio management
44%
Simplification of investment process
37%
Scalability of advisor practice
32%
Consistency in client experience
Advisors report meaningful outcomes from model use, including streamlined investment processes and significant time savings. These benefits allow advisors to focus more on client relationships and financial planning.
For advisors, this reinforces the role of models in scaling portfolio construction. For asset managers, it highlights the growing need for flexible, customizable model solutions.
Alternatives: Growing Demand with Persistent Challenges
Most advisors offer alternative investments, and the primary barriers for those who do not are high fees, complexity, and lack of client demand.
78%
of Advisors offer alternatives
Advisors are increasingly using alternatives to replace traditional “other” allocations such as insurance or annuities.
Why advisors use alternative investments
Diversification remains the dominant reason for including alternatives in portfolios, with client demand seeing a strong increase since 2024.
However, challenges persist, with limited liquidity and high fees ranking as the top concerns. Complexity—especially in explaining these investments to clients—also continues to slow adoption.
Challenges to Offering Alternative Investments
47%
Limited liquidity
39%
High fees and expenses
36%
Complexity and difficulty in explaining to clients
21%
Lack of transparency in investments
Challenges aside, advisors tend to use alternatives in targeted scenarios.
For advisors, alternatives are a targeted tool for diversification. For asset managers, the opportunity lies in simplifying access while addressing concerns around fees, liquidity, and complexity.
ETFs: The Default Investment Vehicle
ETFs have firmly established themselves as the default portfolio building block due to structural advantages. They are widely preferred for cost efficiency and tax benefits across client segments. Mutual funds are increasingly used only in specific situations where ETFs are less suitable.
Active ETF adoption is now mainstream, with most advisors incorporating them into their portfolios, and only 6% not even considering including them.
78%
of Advisors use Active ETFs
ETFs continue to take share from mutual funds, reflecting a structural shift in portfolio construction. Most advisors expect ETF allocations to continue rising over the next two years.
For advisors, ETFs are now the default implementation vehicle. For asset managers, this shift underscores the importance of ETF-based product development and portfolio construction.
The 2026 landscape reflects a clear shift toward scalable, efficient portfolio construction driven by models and ETFs. For advisors, the opportunity lies in translating efficiency into better client outcomes. For asset managers, success depends on enabling scale while addressing persistent challenges around customization and complexity.