Model Portfolio Growth Plateaus as Advisors Pivot to Boost Separately Managed Accounts

Advisor Use of Model Portfolios and SMAs™ report by Cogent Syndicated highlights importance of customization, value for advisors serving high-net-worth clients

LIVONIA, Mich., Feb. 06, 2024 (GLOBE NEWSWIRE) -- Fewer advisors anticipate increasing their allocations to model portfolios in the year ahead, according to data from a Cogent Syndicated report by Escalent, a top data analytics and advisory firm. Instead, as advisors seek to align their investment strategies with the expectations of more-affluent clients, they plan to boost allocations to separately managed accounts (SMAs).

Just one in five (22%) advisors anticipates relying more on model portfolios in the next year, a five-percentage-point drop from 2022. Concerns about underperformance and fees, combined with the need for customization and a more comprehensive array of fund options, are driving the stalling growth of model portfolios.

Meanwhile, advisors anticipate substantial increases in their SMA holdings over the next two years, with average allocations projected to reach 26% in 2025, up from 18% today. This trend is even more pronounced among advisors serving high-net-worth clients, who expect their average allocations to climb from 23% in 2023 to 31% in 2025.

These are the latest findings from Cogent Syndicated’s Advisor Use of Model Portfolios and SMAs™ report, which tracks advisors’ use of model portfolios and SMAs, along with perceptions of leading model portfolio providers and SMA managers. The report examines the competitive landscape for third-party model providers and asset managers and explores how providers can encourage broader adoption of model portfolios.

“The extent to which advisors employ model portfolios and SMAs has the potential to significantly impact how asset managers operate within the wealth management industry,” said Meredith Lloyd Rice, vice president at Escalent. “Despite expectations that advisor reliance on model portfolios would grow, we’re seeing a leveling off in adoption. Advisors are reevaluating whether model portfolios offer the performance and sophistication their more-affluent clients demand.”

While only three in ten (29%) advisors using model portfolios reported increasing their use over the last year, those who did said they appreciated having more time to focus on engaging with clients and building relationships. To attract more advisors serving high-net-worth clients, model portfolio providers should emphasize the value for money, quality, and breadth of investment options that their products offer including access to alternative investments. They should also highlight and consider expanding opportunities for customization and personalization through outcome-oriented solutions.

In addition, providers can promote their support services, including portfolio construction and education on integrating third-party model portfolios into existing platforms.

“For advisors serving high-net-worth clients, customization and tax management is key, and this is one of the factors fueling the growth of SMAs and direct indexing,” continued Lloyd Rice. “Providers who position themselves as industry leaders in delivering tailored, personalized solutions are most likely to find success in meeting the evolving needs of affluent investors and their advisors.”

About Advisor Use of Model Portfolios and SMAs™
Cogent Syndicated conducted an online survey with 403 registered financial advisors from October to November of 2023. To qualify, respondents were required to have an active book of business of at least $5 million and offer investment advice or planning services to individual investors on a fee or transactional basis. Cogent sets quota targets and weights the data to be representative of the overall advisor universe using the Discovery Data Financial Services Industry database as a sample source. Escalent will supply the exact wording of any survey question upon request.

About Escalent
Escalent is an award-winning data analytics and advisory firm specializing in industries facing disruption and business transformation. As catalysts of progress for more than 40 years, we accelerate growth by creating a seamless flow between primary, secondary, syndicated, and internal business data, providing consulting and advisory services from insights through implementation. We are 2,000 team members strong, following the acquisition of C Space and Hall & Partners in April 2023. Escalent is headquartered in Livonia, Michigan, with locations across the US and in Australia, Canada, China, India, Ireland, the Philippines, Singapore, South Africa, UAE and the UK. Visit to see how we are helping shape the brands that are reshaping the world.

CONTACT: Kim Eberhardt