Yes—but only if the model portfolio helps the advisor do a better job for the client.
That sounds obvious. It isn't.
For many RIAs, the question of whether to use model portfolios gets reduced to an investment management decision:
Should we build portfolios ourselves, or outsource them?
I think that is too narrow.
The better question is:
What should our firm be responsible for—and what should we stop doing ourselves?
We’re about to talk about it all.
But first, welcome to the Fortis Portfolio blog. We provide institutional-grade investment research and portfolio strategies to RIA firms. And the best part about it is that we don’t make your clients feel like they are part of a machine.
And now, onto the main feature!
An RIA can spend enormous amounts of time researching securities, adjusting allocations, monitoring portfolios, writing investment commentary, and trying to determine whether this week's market headline changes anything.
Or it can spend more time doing what clients actually hired it to do: helping them make better financial decisions.
That distinction matters.
What is a model portfolio?
A model portfolio is a predefined investment strategy that specifies how assets should generally be allocated across investments.
An RIA can use model portfolios to create a consistent investment approach across clients with similar objectives and risk profiles.
For example, a firm might have conservative, moderate, and aggressive models. Instead of constructing every portfolio from scratch, the advisor uses the appropriate model as the investment framework.
The model can then be implemented across client accounts.
That creates something extremely valuable for an RIA:
repeatability.
But repeatability is not the same thing as personalization.
And that is where advisors need to be thoughtful.
Why should RIAs use model portfolios?
There are several compelling reasons.
1. Models can make investment management more efficient
Let's start with the obvious one.
Managing portfolios takes time.
Research takes time. Monitoring takes time. Rebalancing takes time. Deciding whether to buy, sell, or hold takes time.
If an advisor is doing all of that for every household, the firm's investment process can quickly become a bottleneck.
A well-designed model portfolio can remove a significant amount of that repetitive work.
That gives the advisor something more valuable than another hour behind a computer:
time with clients.
For many RIAs, that is a better use of the firm's resources.
2. Models can create investment consistency
Without a defined investment framework, portfolios can become surprisingly inconsistent.
One client owns one set of ETFs. Another owns a different set. A third has a portfolio built around securities the advisor happened to like five years ago.
Over time, this can create portfolio drift.
A model can establish a consistent investment philosophy and process.
That doesn't mean every client should look identical.
It means the advisor has a starting point.
And having a starting point makes it easier to explain why a portfolio looks the way it does.
3. Models can make client conversations easier
This is one of the most underrated benefits.
Clients don't necessarily need to understand every security in their portfolio.
They need to understand why the portfolio is structured the way it is.
That is a very different conversation.
Instead of walking a client through 30 holdings, an advisor can explain the portfolio's objective, risk level, allocation philosophy, and the role different investments play.
Good investment management should not require clients to become investment analysts.
In fact, if the advisor can't explain the strategy in plain language, that may be a problem with the strategy—not the client.
But there is a downside to model portfolios
Models can create efficiency.
They can also create complacency.
The biggest mistake an RIA can make is assuming that putting a client into a model means the investment work is finished.
It isn't.
A model doesn't know that your client's daughter is starting college.
It doesn't know that your client just sold a business.
It doesn't know that the client has $3 million of appreciated stock sitting in a taxable account.
It doesn't know that the client is about to retire.
And it certainly doesn't know how the client feels when the market falls 20%.
The model manages the portfolio. The advisor manages the context.
That distinction is critical.
Should every client be put into a model?
No.
A model should be a tool—not a mandate.
There will be clients whose circumstances make a standardized model inappropriate.
Tax considerations may require customization.
Concentrated stock positions may require a different approach.
Cash-flow needs may change the appropriate allocation.
Estate planning considerations may influence how assets are positioned.
And some clients simply require a more customized investment solution.
The existence of a model does not eliminate the need for professional judgment.
It should make that judgment more valuable.
The real question: What kind of RIA are you building?
This is where I think the model portfolio conversation gets interesting.
An advisor can build an RIA around investment management.
Or the firm can be built around financial planning, behavioral coaching, tax planning, retirement planning, estate planning, and helping clients make complicated decisions.
Neither model is inherently right or wrong.
But they require different operating models.
If your competitive advantage is your ability to research securities and manage portfolios, then doing that work internally may make sense.
If your competitive advantage is the relationship you have with your clients and the quality of your financial planning, spending thousands of hours trying to recreate institutional investment research may not be the best use of your firm's resources.
That doesn't mean investment management isn't important.
It means you should be honest about where your firm creates the most value.
What should an RIA look for in a model portfolio provider?
Not all models are created equal.
Before adopting a model portfolio, ask:
Is the investment philosophy transparent?
Can you explain why the portfolio owns what it owns?
Is there actual research behind the strategy?
Or is the model simply a collection of popular ETFs?
How is risk managed?
What happens when market conditions change?
How often is the portfolio reviewed?
A model shouldn't be "set it and forget it."
Can the strategy be customized when a client needs it?
A model should provide structure without eliminating advisor judgment.
Can you explain it to a client in plain English?
This one matters more than many advisors realize.
If the explanation requires a 45-minute presentation and 17 slides, you may have a communication problem.
Models should support the advisor—not replace the advisor
There is a temptation in our industry to think that technology, models, and outsourcing can eventually eliminate the messy human side of investing.
I don't think that's the goal.
The best investment process isn't necessarily the one with the most sophisticated model.
It is the one that gives the advisor the confidence and information to have better conversations with clients.
Because clients don't experience markets as spreadsheets.
They experience them as fear, uncertainty, retirement decisions, family decisions, and sometimes sleepless nights.
That's where the advisor matters.
The model can help manage the money.
The advisor still has to manage the feelings.
So, should RIAs use model portfolios?
For many RIAs, yes.
But don't use a model portfolio simply because everyone else is using one.
Use it because it improves your firm's investment process.
Use it because it gives you a consistent framework.
Use it because it frees your team to spend more time with clients.
Use it because you can explain the strategy clearly.
And most importantly, use it without forgetting that every client is a person—not a risk score.
The best model portfolio isn't necessarily the one that eliminates the advisor from the investment process.
It is the one that allows the advisor to spend less time doing work that can be standardized and more time doing the work that can't.
Your clients don't need you to prove that you can manage every security yourself.
They need you to help them make good decisions.
That's a much bigger job.
Are you ready to hire an OCIO?
If investment responsibilities are beginning to compete with client service, business development, or long-term growth initiatives, it may be time to evaluate whether an OCIO partnership can help your firm scale more efficiently while continuing to deliver a high-quality investment experience.
Source: ChatGPT