Model portfolios are reshaping investment strategies, with trillions projected to move into them in the coming years. For fiduciary RIAs, this trend opens the door to new efficiencies, customization opportunities, and growth potential, but also raises questions about costs, differentiation, and operational execution.
These are exactly the kinds of issues being explored in the Wealth Management Track at SS&C Deliver in October. Ahead of the event, we sat down with Laton Spahr, President of SS&C ALPS Advisors, to discuss the rise of model portfolios, the role of SMAs, and what distinguishes firms that thrive in a model-driven practice.
You’re leading a session titled Models to Results | Real-World Applications & Best Practices. What inspired this session, and why is it so timely for advisors right now?
Our inspiration to focus on models is driven by the growth of adoption. Advisors are on pace to have around $3 Trillion invested in model portfolios by the end of 2026. By 2029, that number could eclipse $13 Trillion. This trend originated in the wirehouses but has clearly become dominant among fiduciary RIAs.
With that growth comes natural questions of quality, costs, differentiation, and implementation. This session is designed to help advisors cut through the noise and make confident, informed decisions about model adoption.
We know Separately Managed Accounts (SMAs) are part of the story. How are advisors successfully integrating SMAs into their model-based strategies?
SMAs have been popular for decades. They provide customization for tax efficiency, allowing advisors to tailor exposure, risk, and income preferences to specific clients and households. But they’re not perfect. SMAs can get stuck with burdensome capital gains, they can be limited in their ability to reflect new market conditions, and they are often overpriced. That’s why many advisors are blending SMAs with other vehicles.
Within models, it’s important to look at the interaction of low-cost, tax-efficient, and exposure-efficient building blocks. SMAs and Exchange Traded Funds (ETFs) are very complementary wrappers—with room for mutual funds as well—that allow a model provider to hit multiple targets of customization, low-cost, tax-efficiency, and flexibility.
What are some of the most common obstacles firms face when trying to operationalize models across client portfolios?
Technology and tradition are the two most common obstacles, with technology posing the greatest challenge in managing the entire model process. Advisors must research models, track and update model holdings, customize specific model constituents, trade models tax-efficiently at the account and household levels, and ensure that financial goals are addressed appropriately.
Without automation, the cost of that process is prohibitive. With the right technology, however, it absolutely changes the way a wealth management practice operates and grows. The right technology stack unlocks the time advisors need to focus on personal relationships.
The second, more subtle obstacle, is tradition. Every industry has inertia through tradition. Many advisors have built great lifestyle practices that don’t require the customization and efficiency of technology-driven model management. As these advisors migrate their practices to new owners or new leadership, we tend to see new approaches adopted. It’s really just tension between a mindset of “don’t mess with what’s worked for us in the past” vs. “let’s invest in what could allow us to compete and grow in the future.”
From your experience, what distinguishes firms that thrive with model-based investing from those that struggle?
A couple of things distinguish great model-based advisors from other firms. First is engagement with model providers. It’s tempting to transition to a model-driven practice and hand the reins to the outsourced asset manager and trader. However, that’s not optimal for long.
The client-facing advisor is in the best position to critique models and match the right model to the household. Model portfolios don’t replace the investment oversight of an advisor; they simply take it to a less abstract level, allowing for customization and decision making to improve. That said, advisors must communicate closely with the model provider to align investment philosophy, costs, and goals.
The second element is a commitment to use additional time wisely. Model portfolios and outsourced trading can free up significant amounts of advisor time, allowing for investment in growth and profitability. Great model-based advisors reinvest their time in developing new skills, gaining a deeper understanding of client challenges, and solving financial problems more broadly.
What advice would you offer firms that wish to begin leveraging model portfolios but are hesitant to outsource investment management?
Start by partnering with a provider to consult and execute your proprietary models. It’s usually valuable to have another expert weigh in on your current models. Even if nothing changes, you will still walk away with new insights to consider.
From an execution perspective, even with proprietary models, trading and rebalancing is more accurate and efficient at scale. That’s especially true when one is aiming to meet the fiduciary responsibility of tax efficiency. Partnering with an outside expert does not mean you are abandoning your investment philosophy. Instead, it gives you a greater opportunity to execute your vision.
To hear additional insights and practical strategies from Laton, register to attend SS&C Deliver 2025 and be sure to join his session From Models to Results | Real-World Applications & Best Practices on Tuesday, October 28, at 10:00am.
