How Advisors Are Using ETFs in Model Portfolios
This Daily Upside article examines the rise of model portfolios built around exchange-traded funds (ETFs) among financial advisors, noting that 65% of the $36 trillion allocated to model portfolios is managed in-house by firms themselves. The piece highlights several key benefits — from cost efficiency and easier rebalancing to tax advantages and the ability to serve clients at every stage of life.
My commentary for the article centers on the behavioral and operational advantages model portfolios can offer both advisors and their clients. As I explained, “Models encourage consistency, reducing the urge to time the market or chase whatever is hot.” In other words, the structure of model portfolios helps guard against the biggest behavioral pitfalls that derail long-term progress—like panic buying or selling.
The article goes on to note that model portfolios, whether built in-house or outsourced, have become a scalable solution for busy advisors who must juggle portfolio management, business building, and brand development. The increased use of ETFs as the investment building blocks for these portfolios is credited to their cost-effectiveness and tax efficiency. And while liquidity is often touted as an ETF advantage over mutual funds, most advisors here agree that, for buy-and-hold models, what really makes the difference is transparency and low friction on portfolio changes.
Other advisors in the story discuss strategies like the “core-satellite” approach, using a base of diversified ETFs for the core of the portfolio, then supplementing with actively managed funds or niche exposures as needed. And for younger, tech-savvy clients, ETF-based models deliver the kind of real-time access and visibility they expect.
On the whole, the message is clear: model portfolios using ETFs provide a foundation of discipline and scale, letting advisors spend less time tinkering with individual holdings and more time on holistic planning and client service. As I often remind clients and colleagues, resisting the temptation to chase hot trends and instead relying on a disciplined, model-driven approach with ETFs can be both a behavioral guardrail and a business advantage.
Bottom line:
Model portfolios built on ETFs aren’t just efficient—they’re a safeguard against costly emotional decisions and a way for advisors to deliver consistent value at scale and with ever-greater personalization. In today’s landscape, that’s not just good practice, it’s essential.