‘Off the rack’ model portfolios hit record $7.7 trillion as advisors embrace efficiency and scale

Model portfolios – ready-made third-party investment plans – surged to a record $7.7 trillion in assets in the first quarter of 2025, underscoring the growing demand for efficient, off-the-rack investment strategies among financial advisors and their clients. The findings, released in Broadridge Financial Solutions’ latest quarterly report, show that model portfolios now account for more than one-third of the $22.5 trillion retail intermediary-sold investment market.

“Model portfolios are a way for financial advisors to outsource portfolio construction so they can focus on building their business and working with clients,” said Andrew Guillette, vice president of global insights at Broadridge. “It’s really as simple as that.”

The increasing reliance on model portfolios—particularly those composed of Exchange Traded Funds (ETFS)—is being driven by structural benefits like lower fees, tax efficiency, and flexibility. ETFs now account for 54% of model portfolio assets, surpassing mutual funds, and marking a fundamental shift in investment construction. Active ETFs are growing especially fast, now making up 5.3% of model portfolios—up from just over 2% two years ago.

‘Active ETFs are a big deal’

“Active ETFs are a big deal,” Guillette said. Broadridge found they are growing fast within model portfolios because they provide the benefits of ETFs while still allowing active management. Advisors are increasingly looking to convert their mutual fund allocations into ETFs, and that shift is expected to accelerate over the next few years.

Advisors are also seeking scale and operational efficiency. According to Broadridge, 86% of advisors use model portfolios in some form. Twenty-seven percent rely exclusively on them, while only 14% build fully custom portfolios from scratch. That sweet spot—especially among affluent investors with $100,000 to $1 million in assets—is where model portfolios offer the most value.

40,000 different model portfolios tracked

“We track 40,000 different models,” Guillette said. “We would consider that bespoke custom portfolios are typically more for the higher net worth. But we’re looking for efficiencies. So, the advisors are looking for groups of individuals that share similar risk profiles.”

Of the $7.7 trillion in model portfolios, Advisor-Led strategies are the largest slice at 57%, followed by third-party at 24% and home-office models at 19%. Still, recent growth has favored more centralized approaches. Over the last two years, home-office and advisor-led portfolios have each grown more than 30%, while third-party models posted slower gains due in part to a dip in late 2023.

Retail channels also posted a modest 1.2% gain in the first quarter, with registered investment advisors (RIAs) leading the way at 5.5% growth. Online platforms continued their momentum, up 1%, while broker-dealer channels saw a 1.4% decline. Over the past two years, the online channel has grown by 55.4%.

‘Open-architecture portfolios’ are most common

Open-architecture portfolios—those that use multiple asset managers—now make up more than 77% of model portfolios. However, the top 10 asset managers still control 71.2% of all model portfolio assets, a figure unchanged from the previous quarter.

In terms of asset class, equities dominate model portfolios, accounting for 64% of holdings. Bonds make up about 31%, while alternatives and mixed assets round out the balance. As advisors diversify strategies, they are also eyeing increased exposure to semi-liquid and illiquid alternatives—an emerging frontier for portfolio developers.

Despite the rise in sophistication, many clients may not even realize they are in model portfolios. Guillette notes that most investors see only the outcome of a financial plan and accompanying pie chart—oblivious to whether the structure is a model or customized.

With compound annual growth projected at 15% through 2029, model portfolios are poised to become an even more dominant force in wealth management. As Broadridge has put it, “Everyone wins—advisors gain efficiency, clients receive consistent and well-diversified solutions, and asset managers get a scalable sales channel.”

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