How to select and use model portfolios to serve your clients better
The number of model portfolios available across the industry has surged over the last few years. Learn how to choose models that can help you grow your practice, streamline your investment process, and focus more time on your clients.
There are more options than ever, but not all model portfolios are created equal.
In Morningstar’s U.S. Model Allocation 50%-70% Equity category, return dispersion was 29% over the last 3 years—and widened as more models launched.
1,000+
models launched since 20181
2,700+
model portfolios in Morningstar’s database1
There are more options than ever, but not all model portfolios are created equal.
In Morningstar’s U.S. Model Allocation 50%-70% Equity category, return dispersion was 29% over the last 3 years—and widened as more models launched.
1,000+
models launched since 20181
2,100+
model portfolios in Morningstar’s database1
It’s easy to see why model portfolios are gaining popularity: these offerings allow you to streamline your business, reduce risk, and get back time to spend with clients. But performance varies dramatically model to model, which can make finding the best fit for your client difficult. Here’s what you should look for when selecting model portfolios.
An experienced provider. High-quality model portfolios come from high-quality portfolio managers. Look for a manager with an experienced investment team and institutionally managed strategies.
Strategic portfolio design. Any model you select must fit the needs of your client. The strategic design can help you determine if a model matches your client’s objectives, risk tolerance, and time horizon.
Tactical asset allocation. It’s important to know if a model can shift allocations to react to market changes—and if the portfolio manager has demonstrated success doing so.
Underlying components. A model is only as good as its underlying investments. Consider whether the model’s investments have a record of strong performance and are well-managed.
Due diligence. Does the portfolio manager regularly evaluate the model’s performance? High-quality portfolios are monitored carefully and consistently.
Ongoing support. Good investment management is essential in choosing a model, but a portfolio manager should also provide added resources, like collateral to help you communicate with clients.
It's not enough to choose the right model. You need to know how to use it.
Finding the best model for your client involves much more than just portfolio construction and design. There are many ways to implement model portfolios to meet your clients’ needs.
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It’s easy to see why model portfolios are gaining popularity: these offerings allow you to streamline your business, reduce risk, and get back time to spend with clients. But performance varies dramatically model to model, which can make finding the best fit for your client difficult. Here’s what you should look for when selecting model portfolios.
An experienced provider. High-quality model portfolios come from high-quality portfolio managers. Look for a manager with an experienced investment team and institutionally managed strategies.
Strategic portfolio design. Any model you select must fit the needs of your client. The strategic design can help you determine if a model matches your client’s objectives, risk tolerance, and time horizon.
Tactical asset allocation. It’s important to know if a model can shift allocations to react to market changes—and if the portfolio manager has demonstrated success doing so.
Underlying components. A model is only as good as its underlying investments. Consider whether the model’s investments have a record of strong performance and are well-managed.
Due diligence. Does the portfolio manager regularly evaluate the model’s performance? High-quality portfolios are monitored carefully and consistently.
Ongoing support. Good investment management is essential in choosing a model, but a portfolio manager should also provide added resources, like collateral to help you communicate with clients.
It's not enough to choose the right model. You need to know how to use it.
Finding the best model for your client involves much more than just portfolio construction and design. There are many ways to implement model portfolios to meet your clients’ needs.
Related insights and resources
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Important Information
1 Morningstar database, March 2024.
Investing involves risk including the potential loss of principal.
This material is being furnished for general informational purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, and prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision.
Consider the investment objectives, risks, and charges and expenses of the T. Rowe Price mutual funds carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, visit troweprice.com or contact your financial professional. Read it carefully.
The T. Rowe Price model portfolios are a nondiscretionary investment management program provided by T. Rowe Price Associates, Inc. T. Rowe Price mutual funds are distributed by T. Rowe Price Investment Services, Inc. T. Rowe Price Associates, Inc., and T. Rowe Price Investment Services, Inc., are affiliated companies. The T. Rowe Price group of companies, including its affiliates, receive revenue from T. Rowe Price investment products and services.
This material is provided for informational purposes only; it is not personalized investment advice, a recommendation concerning investments, investment strategies, or account types by T. Rowe Price Associates, Inc., or any of its affiliates (T. Rowe Price), and it is not intended to suggest that any particular investment action is appropriate for you, nor is it intended to serve as the primary basis for investment decision-making. T. Rowe Price’s role is limited to providing your financial professional with nondiscretionary investment advice in the form of model portfolios. The T. Rowe Price model portfolios are only available through financial professionals, and your financial professional is responsible for determining if these portfolios and the mutual funds utilized in them are appropriate for you. T. Rowe Price’s role is limited to providing your advisor with nondiscretionary investment advice in the form of model portfolios. The implementation of these model portfolios and any securities selected for your account is at the full discretion of your financial professional.
Risks: All investments are subject to risk, including possible loss of principal. The model portfolios are subject to the risks of the underlying mutual funds utilized in the model. Fixed income securities are subject to credit risk, liquidity risk, call risk, and interest rate risk. As interest rates rise, bond prices generally fall. International, mid-cap, and small-cap investing are subject to additional risks and volatility. These risks are generally greater for investments in emerging markets. Diversification does not assure a profit nor protect against a loss in a declining market.
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