Model portfolios or asset allocation models are expanding to include a broader range of products, vehicle types, and tax optimization techniques. As providers incorporate these enhancements, advisors can apply these model strategies to a larger client base, from mass-affluent to high-net-worth (HNW) investors, according to The Cerulli Report—U.S. Asset Allocation Model Portfolios 2026.
Asset managers are increasingly incorporating exposure to alternative assets into their model portfolios. As alternative strategies become more accessible, many model providers see an opportunity to reach a broader spectrum of investors through their offerings.
According to the research, 48% of model providers identify the integration of semi-liquid and illiquid alternatives as one of their top three product development initiatives, representing a 17 percentage point increase from the previous year. Among these providers, more than half focus at least a secondary interest on distributing models across all client segments, from the mass market (less than $100,000 in investable assets) to the high-net-worth market (between $5 million and $10 million).
Improving tax efficiency is also a crucial initiative for model providers, regardless of their distribution focus by client segment. More than 80% of model issuers identify tax optimization services for taxable accounts as an important support and service initiative, while 40% cite increasing tax efficiency for taxable clients as one of their top three product development priorities.
“Model providers understand the importance of integrating tax optimization strategies for all client segments,” says Kevin Lyons, associate director. “Among those who prioritize this initiative, more than 40% report focusing, at least secondarily, on mass market, middle market, and mass-affluent clients, while nearly 40% focus on higher-net-worth clients. High-net-worth clients are particularly sensitive to tax efficiency, and solutions offered through models provide advisors with an effective avenue to implement tax overlay strategies at scale,” he adds.
As advisors seek to serve a broader range of clients, Cerulli recommends that model providers continue to focus on tax optimization, customization, and exposure to alternative assets. “Incorporating these features into models enables advisors to reach a wider variety of client segments, including higher wealth tiers,” says Lyons. “As technology, customization, and tax management advance, model portfolios are poised to become an increasingly important vehicle in delivering personalized investment solutions, creating new opportunities for advisor adoption and model asset growth,” he concludes.
