Why over a fourth of advisors are holding off on model portfolios

Why over a fourth of advisors are holding off on model portfolios
Morningstar research reveals what's holding some advisors back, and which providers are leading the way in responding.
FEB 04, 2025

While model portfolios have become a mainstay for many advisory practices, more than one-fourth of advisors are still opting not to offer them, according to new research from Morningstar.

In a new report, it highlighted the features and forces supporting model portfolio adoption, including advisors' desire to outsource at least some of their investment management and focus more on managing client relationships and financial planning services.

But despite the benefits of model portfolios, 27 percent of advisors Morningstar surveyed said they're not ready to completely relinquish control of investment decisions to a model provider.

"The biggest reasons given for not offering models was a preference for customized portfolios and a desire for control over investment decisions," the Morningstar report said.

All told, 41 percent of advisors not using model portfolios said they prefer customized portfolios, far ahead of the 27 percent within that group who perceive a lack of control over investment decisions. Another 25 percent rejected model portfolios over higher costs associated with them, and 24 percent cited the limited flexibility in investment options within model portfolios.

Still, the top challenge holding advisors back from model portfolios may be solved. Drawing from a survey of leading model portfolios providers, Morningstar noted that as of September 30, 2024, assets in custom model portfolios have topped $125 billion, nearly 50 percent higher than where they were on June 30, 2023.

"Customization enables advisors to adjust third-party model portfolios to align with both their personal preferences and clients' needs," Morningstar said. The research defined "custom" as models managed outside a provider's off-the-shelf offerings with some combination of shifting asset allocations, additional asset classes, or swapping funds or vehicles.

Among the 11 providers Morningstar surveyed, Wilshire and BlackRock were the dominant players, which respectively reported more than $50 billion and $45 billion in custom model assets. Taken together, they accounted for nearly three-fourths of the assets in Morningstar's survey.

While still a minor player, Invesco appeared to be emerging as a rising star, posting 536 percent growth in its custom model portfolio assets. T. Rowe Price and State Street also showed notable increases, more than doubling their assets over the period.

"We expect custom models to continue to grow in popularity as more model providers extend their services to meet the growing demand from advisors," Morningstar said.

Latest News

'Bogged down' advisors just want to have fun (again)
'Bogged down' advisors just want to have fun (again)

Jim Cahn, of Wealth Enhancement Group, lifts the lid on his firm's partnership model, his views on RIA M&A, and the widely slept-on reason why advisors are merging into larger organizations.

Vestwell unveils new emergency savings account offering
Vestwell unveils new emergency savings account offering

The fintech firm is cementing its status in the workplace savings space with its latest ESA offering, which employers can integrate into their existing benefits package.

'Money Mimosas' and other ways to show your Valentine financial love
'Money Mimosas' and other ways to show your Valentine financial love

Wealth managers offer unique ideas for couples to grow closer emotionally and financially.

Limra research finds financial confidence on the rise among Black American workers
Limra research finds financial confidence on the rise among Black American workers

Survey findings suggest increased sense of financial security and more optimistic 2025 outlook, while highlighting employers' role in ensuring retirement readiness.

DOGE efforts sideswipe muni bonds backed by federal lease payments
DOGE efforts sideswipe muni bonds backed by federal lease payments

Falling prices for some securities within the $4 trillion state and local government debt market spotlight how the push to shrink spending is sending shockwaves across the US.

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.