AdvisorHub reports that a study by Cerulli Associates reveals that financial advisors are increasingly recommending outsourced asset managers' models over their own firms' in-house options. According to the report, outsourced models are expected to grow at a mid-to-high single-digit annual rate, while in-house models will see only 1 percent to 3 percent growth.

Cerulli Associate Director Matt Apkarian noted that in-house models have shown little growth, especially as broker-dealer platforms have started allowing third-party asset manager models. By the end of 2023, 18 percent of advisors and 22 percent of advisory practices were using either in-house or third-party models, with over a third of those outsourcing expecting to increase their use of model portfolios in the next year.

Assets in model portfolios are projected to reach $2.9 trillion by 2026, up from the current $2.07 trillion. While in-house models still control the majority of assets at 76 percent, outsourced asset managers are expected to account for 28 percent by 2026, up from 24 percent.

AdvisorHub reports that firms are adapting to this trend by partnering with major fund companies like BlackRock, Vanguard, and Capital Group to offer customized models exclusive to their advisors. This allows the firms to retain some control and share in the revenue, even as they outsource model building and allocation decisions.

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