The evidence is clear that the use of model portfolios is growing, especially through third-party providers like asset managers or investment strategists, who are now approaching 1 trillion in model portfolio assets, according to Morningstar. As advisors look to free up time and capacity to grow their practices, they are increasingly turning to solutions that can scale investment management. Many see model portfolios as one approach to improving efficiency and scalability, by allowing them to reduce the time spent building and maintaining individual portfolios by instead using outsourced asset allocation strategies.
The value they find in model portfolios is not only in outsourcing the investment strategy to model providers. For some advisors, model portfolios are integrated into their investment technology ecosystem, enabling tax transition analysis, implementation and rebalancing at scale. Model providers also equip advisors with client-ready reports, digital tools and easily digestible investment commentary to support client conversations. Often, the providers supplying these capabilities become deeply embedded in the advisor’s practice, changing the relationship from being a product provider to a true strategic partner. This benefits the model provider, who can secure a place in the advisor’s ecosystem and avoid disintermediation—something that is increasingly important as many home offices and advisors look to reduce the number of partners in their ecosystems and deepen relationships with the select few that remain.
Some advisors still have reason to be cautious in transitioning to traditional model portfolios. For example, a model provider’s finite set of strategies may not align with an advisor’s preferences for specific funds, asset classes or investment vehicles. While many model providers have expanded their core lineup to include multi-manager, public-private and tax-aware models, home offices and advisors still find gaps between a model provider’s lineup and their investment approach. To address these gaps, custom model portfolios have since emerged as a way for model providers to tailor strategies to the needs of individual home offices and advisors, without sacrificing the efficiency and scalability that model portfolios offer.
The numbers reflect that shift. Custom model assets reached $258 billion as of March 31, 2026, according to Morningstar, a 40% increase from the prior year, and many model providers are dedicating time and resources to developing, growing and scaling their custom model offers. What was once reserved for large home-office clients making significant investments in model portfolios is now increasingly accessible to smaller practices with lower investment requirements. However, as custom model portfolio use increases, model providers face the challenge of delivering customization at scale, without adding high operational and technology cost and headcount to their organization.
Redefining What Customization Means
Customization does not always mean creating a new asset allocation strategy from scratch. A wealth manager may look at a provider’s existing model line-up and simply seek to tailor a model suite to better meet their needs. This could mean substituting mutual funds with ETFs that use the same strategies to pursue greater tax efficiency, or introducing a new asset class, such as alternatives. The motivations for customization can vary. For example, an RIA may use customization to express the value of its independent investment expertise, while partnering with an established asset manager to add institutional credibility. A broker/dealer or wirehouse, by contrast, may use customization to fill gaps in its existing model shelf while ensuring the resulting portfolios remain aligned with the home office’s investment guidelines. In other cases, customization can help wealth managers extend their offering to new client segments, such as the HNW market where demand for alternatives and SMAs is growing.
Customization also often extends past the investment strategy and model portfolio make-up. Clients have come to expect a customized experience. Custom model solutions often come with more hands-on support, including dedicated personnel who work with clients to review and adjust their model strategies. Clients also expect a level of customized reporting, including the ability to white-label or co-brand fact sheets and trade commentary. Some providers are going even further, offering white-labeled portals with interactive tools that advisors can use directly with their clients. Together, these offerings reinforce that the value of a custom model portfolio goes beyond the investment strategy itself. Value lies in how the provider helps advisors put that strategy into practice and bring it to life for their clients.
Lastly, model providers need to meet advisors where they are, delivering custom models to their preferred technology platform, whether that is a home office platform, TAMP, model marketplace or another channel. Traditionally, providers have needed to make their models available across these platforms. Custom models, however, also create an opportunity for providers to offer the technology themselves. Through partnerships with wealth technology platforms or their own solutions, model providers can give advisors without a preferred platform a way to access, further customize and implement model portfolios in a tax-smart manner, often at little or no additional cost to the wealth manager. This makes scalable implementation part of the overall customized offering.
When Customization Complexity Outgrows the Model Provider
As model providers manage an increasing number of model portfolios, the demands on their capacity and infrastructure grow. Those demands increase further when providers are also managing higher-touch client relationships and supporting custom reporting and digital tools. This is where a model provider’s infrastructure, built for a smaller model lineup, can begin to break down.
The challenges begin at the point of sale, where custom model portfolios often require consultative processes that manage extensive information gathering, portfolio design and investment committee reviews. Supporting this process can require additional capacity and specialized skill sets, often increasing headcount as demand grows. To scale this without relying solely on additional staff, providers are often evolving their digital capabilities, using tools such as digital intake processes and online customization tools. This enables the provider to understand an advisor’s customization needs earlier, make first consultations more informed and scale overall client acquisition.
Operationally, many model providers previously relied on spreadsheets and internally developed tools to manage a relatively static model portfolio lineup. Customization has challenged these operations, and providers must now maintain more models while also tracking the lineage between the traditional model suite and each custom variation. This has led providers to rethink how they operate, often partnering with technology vendors to implement capabilities such as encoded customization rules, drift monitoring and rebalancing. These capabilities make it easier to create, review, track and manage custom models at scale.
The growing client expectation for white-labeled or co-branded reports, customized portals and digital toolsets is also pushing model providers to build new digital website capabilities and scale content processes that were once highly manual. This is an area that is quickly evolving, with providers exploring solutions like AI-drafted commentaries and co-developed digital tools with their vendor partners.
Ultimately, those succeeding at customization recognize that the entire value chain must be redesigned to deliver bespoke experiences, with the right design and accompanying infrastructure to make that customization scalable.
Why This Matters: Custom Model Use Is Growing and Building for Scale Can’t Wait
For model providers, customization is quickly becoming a competitive baseline. As home offices increasingly build and manage models in-house, third-party providers will need to offer differentiated solutions and capabilities that go beyond what the home office can provide. Because many third-party providers have already established custom model offerings, they cannot differentiate by simply offering customization. Instead, they will need to differentiate through the breadth and depth of customization and their tailored advisor experience. All while building an offer that is scalable, economically attractive and meets the provider’s compliance requirements.
The question is no longer whether to customize, but rather, how model providers can deliver greater customization without adding disproportionate cost and complexity. Something that will only become more challenging as advisor and client expectations continue to evolve.
