For ETF investors, the key question is not whether model portfolios are popular, but what the wrapper changes in practice. When ETFs become the default building block, advisors can usually translate an allocation view into the portfolio more quickly, with cleaner implementation across equities, fixed income and thematic sleeves. That efficiency matters most when markets move fast and the portfolio must be kept aligned with a target risk profile.
The real edge often shows up in maintenance rather than selection. Model portfolios can reduce the behavioral burden on investors by replacing ad hoc decisions with a predefined process for rebalancing, risk control and security replacement. For long-term allocators, that can be valuable if it helps prevent style drift, concentrated bets or reactionary changes after volatility. The trade-off is less discretion: the portfolio is built for consistency, not customization.
ETF usage also brings implementation questions that deserve attention. Lower expense ratios do not automatically make every model cheaper once trading costs, bid-ask spreads and cash management are considered. In addition, a portfolio made up largely of ETFs can be efficient but still differ meaningfully from a comparable mutual-fund mix in how quickly it can be rebalanced, how transparent the holdings are, and how tax-aware the structure may be in taxable accounts.
As model portfolios expand into new asset classes, the main challenge becomes governance. Investors should understand what role each sleeve plays, how often the portfolio is reviewed, and whether the structure is designed for strategic allocation, tactical adjustments or both. In that sense, ETFs are not just products inside model portfolios; they are often the mechanism that makes the model scalable, repeatable and easier to maintain over time.
How are advisors and investors looking at opportunities within model portfolios these days? Well, recent research seems to suggest that model portfolios in the U.S. are certainly picking up steam.
Key Takeaways:
- Model portfolios are picking up a significant amount of assets in early 2026, with Morningstar finding that third-party model portfolios are seeing assets 46% higher than last yearโs numbers.
- Meanwhile, investors are continuing to allocate billions in inflows towards model portfolios, highlighting the many advantages these tools bring to the table.
- ETFs play a key role in model portfolios, and have outpaced mutual funds as the top underlying vehicle within them.
Back in June, Morningstar released its 2026 US Model Portfolio Landscape. This report examined how much attention model portfolios are getting, and what kind of assets are being added to them.
To begin, the report highlighted that third-party model portfolio assets are nearing $1 trillion, sitting around $943 billion as of the end of March 2026. Notably, this is a 46% increase over last yearโs data, showing just how crucial model portfolios are suddenly becoming to advisors.
Notably, these assets are coming in as model portfolios see compelling inflows. Morningstar noted that across 2025, model portfolios accrued $42.6 billion in net inflows. These gains mark an increase of 42% over 2024โs numbers.
The Model Advantage
To be fair, the momentum behind model portfolios should not come as a particular surprise. After all, these investments offer a distinct set of benefits with broad appeal.
For starters, model portfolios make the overall investment process much more straightforward. Creating a portfolio from start to finish can be a daunting challenge, especially for new investors. Model portfolios offer a pre-built selection of securities, which saves time that would otherwise be spent researching companies, investments, and more.
Furthermore, folks can opt into model portfolios that better fit their needs, goals, and risk profiles. By doing so, investors can make sure theyโre meeting their financial goals without spending as much time navigating the intricacies of the market.
Model portfolios can also provide an easy way to access diversification. When constructing a model portfolio, advisors can add in a wide variety of different securities and investment approaches. This allows investors to access a number of different avenues in the market, all within a single collection.
That being said, it is not like model portfolios are without their downsides. Clients have limited control over their investments, given that advisors or portfolio managers navigate the portfolio for them.
The Growing ETF Presence
Keeping this in mind, what kind of investments are advisors putting into model portfolios as of late? Morningstarโs report found that between March 2021 and March 2026, ETFs have overtaken mutual funds as the top underlying investment vehicle. Across that five-year time span, model portfolios on average increased their ETF allocations by 13.1%.
In 2026, an average model portfolio holds 55.4% of its assets within the ETF wrapper. Meanwhile, mutual funds are still utilized heavily, but only constitute 34% of the average model portfolioโs assets. These numbers speak volumes about the momentum being the ETF wrapper itself, along with increased innovation in the ETF market.
A Future For Private Assets
Another part of model portfolios undergoing change is how asset managers view private assets. Considering the growing interest from the broader investment community in private assets, itโs crucial to understand how things are shifting for model portfolios.
69% of the firms that Morningstar surveyed have stated that they either already offer private market exposure within their model portfolios, or plan to do so across the next three years. This is obviously a large sum of respondents, and further reflects the diversification opportunities already present within the model portfolio structure.
Putting this all together, itโs becoming increasingly clear that model portfolios are undergoing a significant change, and at a rapid pace. Advisors who wish to stay ahead of the curve would do well to keep this in mind as they look ahead to the remainder of 2026 and beyond.
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