Three Forces Reshaping Asset Management

Asset management firms are finding it increasingly difficult to stand out. In our survey of more than 60 US asset managers, over half said distribution and asset gathering were their biggest challenge as passive, low-cost products expand market share. 

In this video, Joseph Agostinelli and Ben Johnson discuss how adapting to generative AI, model portfolios, and alternative investments can help asset managers thrive. 

Joe Agostinelli: While asset managers now have access to more data than ever, firms are finding it incredibly difficult to separate the noise from the right signals. 

Through our Morningstar Investor Perspectives market research program, we surveyed more than 60 asset managers across the US to understand their most pressing challenges and how their relationships with financial advisors are evolving. 

Most agreed that while driving performance still matters, advisors increasingly expect more proactive engagement, possibly driven by the rising communication demands from their own clients. To stay ahead, asset managers must apply these insights to deliver personalized, holistic solutions. 

Let's take a look at how top managers are embracing Gen AI, private investments, and model portfolios to gain a competitive edge. 

Ben Johnson: Because it's 2026, we have to talk about generative AI. More than half of the asset managers we heard from believe Gen AI will fundamentally transform the industry in the next three years. 

For those already using it, the results are tangible, with 53% reporting improvements in their day-to-day efficiency in areas like research and communications. With 64% planning to add more AI capabilities this year, firms are seeing the power of this technology to handle the heavy lifting so their teams can refocus on higher value-add activities. 

There's another kind of AI that's generating a lot of buzz today: alternative investments. 

Most of the action in alternatives today is happening at the intersection of public and private markets. Morningstar Investor Perspectives Research found that 50% of advisors expect to increase their clients’ allocation to private markets. 

Asset managers’ outlook for private market allocations is even more bullish, with 61% anticipating an increase. However, complexity remains a big hurdle as asset managers struggle to differentiate their offerings in a crowded niche. 

To bridge this gap, asset managers need to lean into educating their clients on the why, what, and how of private markets in the context of a diversified portfolio. They also need to move away from treating private markets as an aside. Instead, they should unify their approach to portfolio analytics to give clients a holistic view of their entire portfolio solutions. 

By providing advisor-ready narratives and clear education on the role of alternatives in a portfolio, managers can turn a complex product into a foundational piece of a client's strategy. 

We've also been tracking the rise of model portfolios as they've become a core strategic priority.  

Assets under advisement in model portfolios reported to Morningstar have more than doubled since 2021. From an advisor’s perspective, models are seen as an efficiency play. Outsourcing portfolio construction to trusted partners gives advisors more time to spend with their clients. 

Asset managers generally focused their model portfolio solutions on core strategic allocation solutions, but custom models are increasingly popular, as are those that target specific asset classes like bonds and specific objectives like income. 

Asset managers are diversifying their model offerings to ensure that they can continue to deliver on advisors’ need for efficiency and choice among a variety of solutions. 

Agostinelli: Whether it's the shift toward Gen AI, the rise of private markets, or the efficiency of model portfolios, it's clear that we're looking at a very interconnected ecosystem. Asset managers who adapt to new digital demands and provide real transparency will be the ones who thrive. 

Are you ready to see how these shifting priorities will impact your 2026 distribution strategy?