What Advisors Are Looking for in Model Portfolios—and What It Means for Asset Managers

For asset managers, the question is no longer whether advisors will adopt model portfolios, but what advisors want those models to deliver. Preferences around ETFs, alternatives, customization, and implementation are increasingly influencing portfolio decisions and manager selection. Advisors, for their part, are seeking practical ways to leverage model portfolios, ETFs, and alternatives to improve scalability while continuing to meet diverse client needs.

The 2026 Morningstar Investor Perspectives: Advisor Deep Dive survey reveals a clear shift in how portfolios are being constructed, delivered, and scaled when compared to 2024 data. This includes the growth of model portfolios, expanding adoption of ETFs, and the selective integration of alternative investments.

Across the US industry, advisors are moving toward more standardized, model-driven approaches to portfolio construction. This is driven by the need for greater efficiency, consistency, and scalability in investment management. Advisors continue to balance scale with customization. Where possible, advisors use models that incorporate ETFs as core building blocks and alternatives as portfolio diversifiers. Where needed, advisors adapt models to meet specific client needs.

Asset managers are seeking the same balance of scale and customization. Their success increasingly depends on delivering flexible, ETF-centric solutions that support scalable model portfolios while also addressing ongoing demands for customization, transparency, and ease of use.

Together, our US survey findings highlight several new trends in portfolio construction. Let’s take a deeper dive into the research.

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 are also cited as common barriers.

For advisors that have adopted model portfolios, the impact extends beyond efficiency. Models are also influencing asset allocation decisions, driving greater use of ETFs and alternatives while reducing allocations to individual stocks.

Advisors are also shifting toward outsourcing, with more relying on standardized model portfolios rather than modifying or 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 tax-efficient and blended active/passive models.

Efficiency is the primary driver behind model portfolio adoption, enabling advisors to streamline portfolio management.

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.

Advisors are increasingly using alternatives to replace traditional “other” allocations such as insurance or annuities.

Diversification remains the dominant reason that advisors include alternatives in portfolios, with client demand seeing a strong increase since 2024.

However, challenges persist with incorporating alternatives: Limited liquidity and high fees rank as the top concerns. Complexity—especially when it comes to explaining these investments to clients—also continues to slow adoption among advisors.

That said, advisors still tend to use alternatives in certain scenarios.

For advisors, alternatives are a targeted tool for diversification. For asset managers, the opportunity lies in simplifying access to these investments while addressing concerns around fees, liquidity, and complexity.

While ETFs are now a core component of portfolio construction, advisor preferences within the category continue to evolve. Active ETFs have emerged as a significant growth area, with widespread adoption across advisor portfolios and only 6% of advisors not considering their use.

As ETFs gain share, mutual funds are increasingly being confined to select areas where their structure offers distinct advantages.

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.

Stay tuned for more insights from our Morningstar Investor Perspectives market research. 

A total of 299 responses from US financial advisors working with individual and/or retail investors across the United States were collected during a 10-minute online survey throughout the month of May 2026 for the 2026 Morningstar Investor Perspectives: Advisor Deep Dive survey. Respondents were required to have a minimum of $10 million total assets under management within their clients’ book of business. Morningstar was not identified as the sponsor of this survey. 

For a deeper look at the evolving role of model portfolios and the factors driving advisor adoption, explore our Model Portfolio Landscape research.