Model portfolios—centrally managed investment strategies used by financial advisors—have seen notable evolution in 2025, driven by technology, regulatory shifts, fee pressures, and personalization demand.
Key Trends in 2025
Increased Adoption Across Advisor Channels
- Wirehouses, RIAs, and independent broker-dealers are scaling usage to improve consistency and compliance.
- Usage has grown particularly in hybrid advisor models and turnkey asset management platforms (TAMPs).
Customization and Direct Indexing
- Advisors are using tools to customize models for tax optimization, ESG preferences, or client-specific restrictions.
- Direct indexing is now frequently embedded into models, especially for taxable accounts.
AI-Driven Optimization
AI and machine learning are being used to rebalance portfolios, optimize tax outcomes, and tailor strategies at scale.
Unified Managed Accounts (UMAs)
Growth in UMA platforms offering sleeve-based strategies (e.g., ETF + SMA + mutual fund combinations) under one account structure.
Thematic and ESG Models
- Demand for models aligned with climate, innovation, or demographic megatrends continues.
- ESG integration has matured, with multi-dimensional scoring systems.
Regulatory & Compliance Pressures
- SEC’s Regulation Best Interest (Reg BI) and MiFID II are pushing firms toward more transparent, documented model use.
- Compliance tools are more tightly integrated with model delivery platforms.
Model Portfolio Structures
| Type | Description | Typical Use Case |
| Strategic Allocation | Long-term asset allocation with periodic rebalancing | Core portfolio for most investors |
| Tactical Allocation | Shifts allocations based on macroeconomic outlooks | Advisors looking to add alpha |
| Income-Oriented | Focus on yield (dividends, fixed income, REITs) | Retirees, income-seeking clients |
| ESG / Impact | Incorporates environmental, social, and governance factors | Values-based investors |
| Tax-Optimized | Models designed for after-tax returns, including tax-loss harvesting | High-net-worth taxable accounts |
| Thematic Models | Sector or trend-focused (e.g., AI, healthcare, clean energy) | Clients with specific interests |
How Advisors Use Model Portfolios in 2025
- Core-satellite strategies combining passive models (core) with actively managed sleeves (satellite).
- Hybrid delivery, mixing firm-created models with third-party strategist models.
- Tiered offerings (e.g., foundation, standard, premium) based on client sophistication or AUM.