What Advisors Need to Know About Portfolio Construction in 2026

Creating and managing an investment portfolio that aligns with a client’s goals, risk tolerance and expectations is an important part of being a financial advisor. Modern advisors increasingly rely on deep risk analysis and model portfolios to construct sound investment plans. Artificial intelligence and other tech tools can assist with the portfolio construction process, potentially saving advisors valuable time that can be redirected to other growth activities.

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Conventional Client Portfolio Construction Strategies

Traditional client portfolio construction methods continue to work in 2026. What’s important when considering these methods is not so much how they work, as matching them to the right client. Here are some examples:

Any of these portfolio construction strategies can incorporate investing themes such as growth investing, income investing or socially responsible investing. When choosing from this menu, consider your client’s current position and where they’d like to eventually end up.

Understanding your clients’ pain points, goals and desires, as well as their emotional responses to market swings, can inform your decision. If you don’t have an ideal client profile or buyer persona, you may spend time developing them to better understand what your clients require to meet their goals.

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Client Portfolio Construction in the Digital Era

Financial services is continually evolving, and the rise of new technologies and trends can have a substantial impact on how advisors serve their clients. AI, model portfolios and the emergence of new alternative investment classes represent driving forces of change in portfolio construction.

AI Risk Analysis

Risk analysis is a critical component of portfolio construction, and AI tools are reshaping the way advisors approach this task. AI-driven risk analysis tools can review large datasets in a fraction of the time it would take a human advisor to do so. These tools can also monitor market trends and client behavior to develop risk profiles that can adapt in real time as new data is collected.

Over 70% of advisors report using AI tools in their practice, jumping to 81% among high-AUM firms, according to a 2026 InspereX survey of 783 financial professionals. Those advisors reported realizing the biggest efficiency gains when using AI tools to conduct research and gather insights. ¹

Here are some possibilities for how advisors can use AI for portfolio construction:

• Risk modeling/stress testing: AI tools can simulate shifting market volatility to predict portfolio outcomes, detect hidden risk factors in a client’s portfolio and identify exposure gaps.
• Allocation: AI can assess client investments, including assets held away, to develop an optimal allocation profile.
• Rebalancing: Automated rebalancing powered by AI relieves advisors of the burden of handling this task manually, and ensures that client portfolios remain aligned with their optimal allocation.
• Behavior monitoring: AI tools can track client behaviors, based on their online activity, to determine market sentiment and emotional responses to market triggers.

Adapting Model Portfolios to Your Client

Model portfolios are also streamlining portfolio construction and among many advisors, replacing more traditional methods. As of March 2026, model portfolio assets totaled $943 billion, according to Morningstar’s US Model Portfolio Landscape report. That’s more than three times as much money as was invested in model portfolios in June 2021. ²

These models, which are typically developed by professional asset managers, established brokerages and investment research firms, offer advisors a blueprint to follow when constructing client portfolios.

The advantage of model portfolios is that they’re customizable. Pre-built asset allocations can be modified to reflect specific client preferences and goals, and modified again as needed when your clients’ needs change.

Here are some ways to handle customization with model portfolios:

• Substitute: Model portfolios typically come with preset funds, but you’re not bound by those choices. Advisors can trade funds in or out, swapping them for actively or passively managed funds and ETFs to match client needs.
• Adjust: You may find that the asset allocation suggested by a model portfolio exposes a client to too much or too little risk. Allocations can be adjusted to mirror individual client risk profiles, without shifting the portfolio’s core focus.
• Add: If a model portfolio lacks diversification, it’s a relatively simple fix to add exposure to different asset classes. Note that some platforms may require you to bring a minimum AUM to the table to access bespoke or custom models.
• Optimize: Advisors may implement rules that trigger certain actions, such as harvesting tax losses or rebalancing, to maximize returns while balancing risk.

Alternative Investments

More than half, 56%, of investors have invested in at least one type of alternative or private investment, according to Morningstar’s 2025 Voice of the Investor Study. ³ Introducing clients to alternatives, using traditional portfolio construction methods or model portfolios could allow you to take advantage of growth opportunities as more advisors look beyond stocks and bonds to build wealth.

This strategy requires an understanding of your clients and their motivations for seeking alternatives. In the Morningstar study, for instance, alternatives were most common in the portfolios of younger investors and wealthier households. Twenty-three percent of Gen Z investors held three or more alternatives compared to just 3% of Baby Boomers. The average household income for investors with three or more alternatives was $142,354.

Diversification was the primary driver, and some alternatives prove more popular than others. Cryptocurrency, for example, was preferred by 27% of investors while 25% leaned toward private equity. Talking to clients about their preferences regarding alternatives may shed light on whether alternatives belong in their portfolio.

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Professional Certifications for Portfolio Construction

If you’d like to expand your knowledge in portfolio construction and management, you might consider earning one or more professional credentials. This is a way to add value for current clients while potentially attracting new ones who are looking for an advisor with portfolio management expertise.

In terms of what may prove helpful, a Chartered Financial Analyst (CFA) designation is on the list. CFAs analyze investments to manage portfolios and guide financial decision-making for their clients. This designation, which is considered to be a gold standard for financial analysts, is offered by the CFA Institute.

A certified investment management analyst (CIMA) credential is another option. CIMA professionals, who perform many of the same functions as CFAs, typically serve a high-net-worth clientele. You may choose to earn this credential if you’d like to add wealthy clients to your book of business. The Investments & Wealth Institute (IWI) offers this certification.

Two distinct credentials also use the CPM abbreviation. The chartered portfolio manager (CPM) designation, offered by the Global Academy of Finance and Management, covers portfolio theory, asset allocation, investment analysis and risk management. The certified portfolio manager (CPM) designation, offered by the Academy of Certified Portfolio Managers, focuses on security analysis, asset allocation and portfolio management for professionals managing discretionary portfolios.

Frequently Asked Questions (FAQs)

Bottom Line

Financial advisors have a variety of portfolio construction strategies to choose from when setting up a portfolio for a client. Each strategy has characteristics that make it more or less suitable to an individual based on their unique goals, risk tolerance and other traits. An advisor’s main tasks consist of gathering information about client characteristics, selecting asset classes and individual securities, and monitoring and adjusting the client’s portfolio.

Portfolio Construction Tips

• Permanent portfolios are designed to withstand changing market environments. You might consider this option for clients who are highly risk averse, and are willing to accept lower returns over the long term to limit their exposure to volatility.
• If you don’t have a lot of time to actively spend on marketing, you might consider using an online marketing service that brings leads to you. SmartAsset AMP (Advisor Marketing Platform) is our holistic marketing service financial advisors can use for client lead generation and automated marketing. Sign up for a free demo to explore how SmartAsset AMP can help you expand your practice’s marketing operation. Get started today.

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