# Model portfolio

> A model portfolio is a preset mix of investments that an advisor or outside manager uses as a template for many clients' accounts, adjusted for each person's goals and risk.

Canonical page: https://find.wellspent.co/glossary/model-portfolio/
Also called: investment model, model-based management

Many advisors run a handful of models, from conservative to aggressive, and rebalance each client's account back toward its model. It keeps accounts consistent and makes trading efficient. The models can be built in-house, licensed from a fund company, or run by a TAMP.

SEC rules for managed account programs expect each account to be managed for that client's financial situation and objectives, with the chance to impose reasonable restrictions. A model shouldn't override what's specific to you, such as where your taxable and retirement money sits.

Two things to ask: whether the model favors the firm's own or affiliated funds, which Form CRS lists as a conflict, and the weighted expense ratio of the funds in it, which you pay on top of the advisor's fee.

## How to check

Read Item 8 (Methods of Analysis, Investment Strategies and Risk of Loss) and Item 4 of the firm's Form ADV Part 2A brochure, and ask for the model's holdings and their expense ratios.

## Sources

- [SEC Rule 3a-4, Status of investment advisory programs, 17 CFR 270.3a-4, via Cornell LII](https://www.law.cornell.edu/cfr/text/17/270.3a-4)
- [SEC, Form ADV Part 2 instructions, Items 4 and 8 (SEC 1707, 08-22)](https://www.sec.gov/about/forms/formadv-part2.pdf)
- [SEC, Form CRS instructions, Item 3.B (proprietary products)](https://www.sec.gov/files/formcrs.pdf)

## Related terms

- [Turnkey asset management program (TAMP)](https://find.wellspent.co/glossary/tamp.md)
- [Robo-advisor](https://find.wellspent.co/glossary/robo-advisor.md)
- [Expense ratio](https://find.wellspent.co/glossary/expense-ratio.md)
- [Discretionary authority](https://find.wellspent.co/glossary/discretionary-authority.md)