Sinead Schaffer

Managed accounts have overtaken other investment vehicles to become the preferred core portfolio solution for Australian financial advisers, according to the newly released 17th State Street/Investment Trends Managed Accounts Report. The research, published today by State Street Investment Management, Australia’s largest asset manager^[1], together with Investment Trends, is based on the responses of 1,086 financial advisers across Australia between November 2025 and January 2026. It finds managed account adoption has firmly entered the mainstream, as advisers respond to heightened market volatility, persistent inflationary pressures and rising operational complexity.

Adviser usage has reached a record level, with 61% of advisers now using managed accounts and a further 13% actively considering adoption, taking potential market penetration close to three-quarters of the adviser industry. Notably, new adoption has accelerated, with 27% of advisers having recommended managed accounts for one year or less.

Conviction among users is deepening. Nearly three-quarters (73%) of advisers who use managed accounts now position them at the center of client portfolios as a core solution rather than as satellite allocations. Reflecting this shift, advisers now direct 61% of new client flows into managed account solutions, up from 48% in 2025.

Over 40% of advisers agreed that during periods of market volatility their clients in managed accounts are more confident in their portfolios and less likely to make impulsive portfolio changes compared with those not in managed accounts.

“Advisers are increasingly turning to managed accounts to bring greater discipline, consistency and oversight to portfolio construction,” said Sinead Schaffer, Vice President and Model Portfolio Strategist in Asia Pacific at State Street Investment Management. “In an environment marked by ongoing economic uncertainty, heightened geopolitical tensions and persistent inflationary pressures, advisers are looking for scalable, outcomes‑focused solutions. Managed accounts help support long‑term investment discipline while simplifying portfolio management and rebalancing.”

Managed accounts funds under management (FUM) have reached a record of $256 billion^[2], with the industry expected to grow to $400 billion by the end of 2027.

Beyond client outcomes, advisers are also seeing tangible commercial benefits. Almost six in ten (59%) say managed accounts have improved business profitability. Adoption is highest among larger and more profitable practices.73% of advisers from practices with more than 5 advisers use managed accounts, compared with 61% of advisers in practices with 2 to 5 advisers and 54% of sole advisers. Around two‑thirds (65%) of advisers from practices reporting net profit margins above 30% are using managed accounts, versus 59% of advisers from practices with net profit margins below 30%.

Efficiency gains drive adoption as operational pressures mount

The strongest benefits cited by advisers are operational. Seven in ten (70%) point to simplified portfolio management and rebalancing as a key advantage, while around 60% highlight time savings, reduced compliance workload, and improved scalability. Notably, 59% of those who reported time savings say managed accounts allow them to service a larger client base, driven by the time saved through automation and streamlined processes.

Governance benefits are also being recognised. Around half of advisers say managed accounts strengthen governance and support best interest obligations, an impact that is particularly pronounced among smaller advice practices.

“As managed accounts move into the core of advice delivery, advisers are reporting benefits that extend well beyond investment implementation,” said Eric Blewitt, CEO of Investment Trends. “Many cite easier portfolio monitoring and access to institutional‑quality investment management as key client benefits, while practice benefits – particularly simplified management, time savings, and reduced compliance workload – are reinforcing managed accounts as an essential operating tool for advice businesses.”

Implementation barriers continue to ease. One in four advisers (23%) now report no challenges implementing managed accounts, up from 18% the previous year. Among advisers yet to adopt, the main hurdles are less about belief in the benefits and more about the perceived cost, effort and complexity of transitioning existing clients.

Performance and platform access shape adviser decisions

When recommending managed accounts, advisers rank performance as the most important factor (46%), followed by availability on their primary investment platform (35%), competitive fees (28%), and the reputation of the asset manager (26%).

Advisers want solutions that deliver consistent outcomes for clients while integrating easily into their existing platforms and advice processes. Managed accounts are typically aligned to clients’ risk tolerance and investment horizon, and are most commonly used for longer-term investors. More than half of advisers use managed accounts for clients investing for 6 years or longer, with an average investment horizon of 7.6 years.

SMAs remain the preferred choice by advisers

Separately Managed Accounts (SMAs) remain the most widely used managed account structure, with around nine in ten advisers implementing managed accounts via SMAs.

Off-the-shelf solutions continue to dominate, with one-third of advisers using pre-built models with minor customisation. Ease of implementation, cost efficiency for clients and reduced rebalancing requirements underpin their popularity. Use of ETFs within managed accounts is also rising, with passive ETF allocations increasing from 16% to 21% year on year.

Australian investors typically access model portfolios through managed accounts. State Street Investment Management officially launched its ETF Model Portfolio capability in Australia in 2019, offering five model portfolios across the risk spectrum and target income strategy. Model portfolios employ diversified investment approaches designed to balance risk and return in line with specific investment objectives.

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Notes:
[1] Source: Rainmaker Wholesale Advantage Report, as of September 30 2025.
[2] Source: IMAP/Milliman, as of June 30, 2025.

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Kathleen Gallagher

Model portfolios have shifted from niche to mainstream, both in the United States (US) and Australia, marking a major change in the financial advisory landscape. In the US, model portfolio assets are on a remarkable trajectory and are expected to reach US$3.4 trillion by 2027^[1], while in Australia, model portfolios implemented via managed account have grown nearly 30% in just one year – more than doubling over five years^[4].

This growth is driven by evolving client expectations. Over the past five years, investors have come to expect more from their advisers, increasing the demand for efficient and effective investment strategies. Model portfolios have proven invaluable, freeing up advisers’ time to focus on client relationships and strategic advice. In fact, 60% of advisers cite time savings as the main benefit, with many redirecting nearly a full day each week to highervalue activities.^[2] In the US, this benefit is realised by 55% of advisers, who use model portfolios to spend more time on financial planning.^[2]

Investor awareness is rising. In Australia, investors who know their assets are in model portfolios report significantly higher satisfaction with their advisers, valuing transparency, effective issue resolution, and portfolio optimisation. However, nearly half of investors remain unaware of their model portfolio holdings, highlighting an opportunity for further education and engagement.^[3]

By understanding the trends and developments in the US market, we can gain valuable insights that may shape the future of the Australian model portfolio market.

Alternatives: Expanding the investment universe

A notable trend is the growing inclusion of alternative investments in model portfolios. In the US, demand for private assets is driven by their potential to provide diversification, downside risk protection, reduced volatility, and enhanced return potential. Providers in this region often offer dedicated models of alternatives, rather than integrating them into multi-asset portfolios. The demand for private markets exposure is mirrored in Australia, with over a third (35%) of managed account advisers keen to access them through managed accounts.^[2] Both locally and abroad, platforms are evolving to better support the valuation and administration of these less liquid assets.

Asset allocation and investment themes

In the US, most model portfolios are risk-based (73%), with 21% focus on specific investment objectives. Strategic asset allocation (SAA) is used by 81% of models, and 63% employ tactical asset allocation (TAA).1 ETFs are increasingly preferred as portfolio building blocks, with passive ETFs representing nearly 40% of model assets.^[1] In Australia, managed account advisers allocate close to two-thirds of client assets to managed accounts as the core, supplementing with term deposits or actively managed funds as satellites.^[2] Growth-oriented strategies remain popular, with two-thirds of advisers adopting them, while risk-based strategies are used less frequently than in the US – 45% – particularly for clients with assets between $500k and $1.5 million.^[2]

Adviser experience and due diligence

In Australia, advisers are recommending fewer models — 12 on average, down from 22 in 2024 — reflecting a focus on efficiency and reduced duplication. Due diligence remains resource-intensive, with advisers using five tools on average, including investment manager reports, platform information, and research house tools. Performance is the most important factor when selecting managed accounts, followed by platform availability and fees. This trend is consistent in the US, where performance, investment policy, and fees are the top factors used to differentiate model portfolio offerings.^[1]

Locally, the benefits of managed accounts become increasingly evident over time. Advisers with four or more years of experience using managed accounts report, on average, 35% higher client inflows and FUA balances compared to newer users. The value proposition is evolving, with 38% of advisers outsourcing portfolio construction to investment professionals, 20% delivering more tailored services, and 26% are shifting their value-add from investment returns.

As the investment landscape evolves, exploring optimal strategies is essential. if you’re looking to leverage ETFs within model portfolios, visit the State Street ETF Model Portfolio webpage to discover how our solutions can enhance your investment approach with greater transparency, performance, and cost-efficiency.

By Kathleen Gallagher, Head of ETF Model Portfolio Solutions EMEA & APAC and Sinead Schaffer, ETF Model Portfolio Strategist

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Notes:
[1] Cerulli Report, U.S. Asset Allocation Model Portfolios 2024
[2] SPDR ETFs / Investment Trends 2025 Managed Accounts Report
[3] State Street Investment Management Model Portfolios: Adaptive Solutions for Advisory Growth research, December 2024.
[4] 4 IMAP’s FUM Census of Managed Accounts, as at 30 June 2025

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Model portfolios are now widely used buut investors want more than just easy access to the market—they’re looking for personalised guidance that fits their goals, values, and life plans.

State Street Investment Management has released some new research on the way Australian and US investors and financial advisors are using model portfolios. 

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“Today marks a new chapter in our story – one that reflects our values, honours our rich heritage, and brings our vision for the future into sharper focus,” said Yie-Hsin Hung, President and Chief Executive Officer of State Street Investment Management. “Our new brand underscores our mission of investing in our clients as they invest in the markets, delivering tailored solutions, and prioritising partnerships.”

In developing the new brand identity, State Street conducted research and solicited input and feedback from clients, investors and employees around the world. The update puts a stronger focus on the firm’s “One State Street” approach that aims to enhance collaboration across State Street Corporation and expand offerings for the benefit of investors globally.

Founded in 1978 and headquartered in Boston, State Street Investment Management is the fourth-largest asset manager in the world*, managing approximately $4.67 trillion in assets† and serving a spectrum of clients, from institutional and individual investors to plan sponsors and financial advisors.

“State Street Investment Management is an essential partner to investors, offering them unparalleled expertise, unique insights, and both innovative and cost-effective solutions,” said John Brockelman, Chief Marketing Officer for State Street Investment Management. “We’re excited to unveil a new brand that communicates that promise. These changes to our brand strengthen our value proposition, simplify the way we go to market, and improve our clients’ experience across State Street.”

“To us, the word ‘investment’ is not just about the capital markets,” said Hung. “As a firm, we’re investing in our relationships, investing in innovation and investing in the future. We’re helping secure better outcomes for our clients, and we’re pleased to present a new brand name that reflects this.”

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*Pensions & Investments Research Center, as of 12/31/24.

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