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Managed accounts selection: A due diligence framework

Managed accounts can help advice practices simplify portfolio implementation, strengthen governance, and deliver a more consistent investment experience. Realising those benefits depends on selecting appropriate solutions and monitoring them effectively over time.
This article provides a practical framework advisers, practices, and licensees can use when evaluating model portfolios delivered through managed accounts.

20 October 2026

Why due diligence matters

Selecting a managed account is not simply a product comparison. It requires an assessment of how the solution is designed, governed, implemented, and supported, and whether it is appropriate for the clients for whom it is intended.

A structured and repeatable process helps advisers compare solutions consistently, identify material risks, document the basis for approval, and maintain appropriate oversight after implementation. It also supports clearer conversations with clients about the role of the model, how it is expected to behave, and the circumstances in which it may be reviewed or replaced.

Common due diligence challenges

Breadth of choice: A wide range of models may be available across platforms and Approved Product Lists. A defined assessment framework helps narrow the field using criteria relevant to the intended client cohort.
Resource intensity: A thorough review requires time and capability across investment, operational, risk, legal, and compliance disciplines. Responsibilities should be clear, particularly where external research or specialist support is used.
Data and transparency: Differences in benchmarks, methodology, holdings, performance reporting, and fee disclosure can make like-for-like comparison difficult. Information gaps should be identified and resolved before approval.
Governance and regulatory considerations: Advisers and licensees need to consider client suitability, conflicts of interest, governance arrangements, and the evidence supporting recommendations.

Tools that can support the review

Due diligence typically draws on several sources rather than a single rating or measure. Each input should be considered in the context of the model’s objective, intended use, and client cohort.

External research houses

Provide independent research, ratings and analysis of investment capability and governance.

Comparison platforms

Support comparison of fees, performance and risk measures across providers and models.

Performance and risk analysis

Examines returns, drawdowns, volatility and other risk measures in the context of the model’s objective and benchmark.

Provider due diligence materials

Explain the investment process, governance structure, team responsibilities, implementation approach and service model.

Fee and cost analysis

Assesses management, administration, implementation, trading and other costs that may affect the client experience.

APL and periodic reviews

Support documented assessment of approved models and continued alignment with client needs and governance requirements.

A practical managed accounts due diligence framework

Whether due diligence is conducted by the adviser, practice, licensee, or an external specialist, the assessment should consider the following key areas:

Investment methodology

Review the portfolio objective, strategic asset allocation, permitted ranges, portfolio construction assumptions, benchmark selection, and rebalancing approach. Consider whether the methodology is understandable, repeatable, and aligned with the model’s stated purpose. Assess results against the stated objective and relevant benchmarks rather than headline returns alone.

Provider experience and capability

Consider the provider’s relevant investment experience, team structure, and stability, their decision-making responsibilities, and ability to manage the proposed strategy. Understand who is accountable for portfolio decisions and how key-person risk and succession are managed.

Resources and implementation

Assess the investment, risk, compliance, legal, operations and trading resources supporting the model. Confirm how portfolio changes are approved, communicated, and implemented, and how operational issues are identified and escalated. Review total cost rather than the headline management fee alone.

Governance and risk controls

Confirm that responsibilities are clear across the provider, platform, licensee and adviser. Examine committee structures, delegated authorities, conflicts management, model monitoring, breach processes, liquidity controls and rebalancing protocols.

Communications and service

Evaluate the timeliness, clarity and usefulness of portfolio updates, performance commentary, change notifications and adviser support. Communications should help advisers explain the model’s positioning, expected behaviour and periods of underperformance to clients.

Transparency

Confirm that holdings, benchmarks, methodology, fees, performance, material risks and conflicts are clearly disclosed. Identify any information gaps and document how they were resolved before approval.

Document the decision, not just the data

Record the evidence reviewed, material risks identified, how the model fits the intended client cohort, any conditions placed on approval, the review frequency, and the triggers for an out-of-cycle review.

From selection to ongoing oversight

Due diligence does not end when a model is added to an APL or recommended to a client. Establish a monitoring schedule that is proportionate to the nature and complexity of the solution, and define who is responsible for each element of the review.

Review triggers may include:

A material change to the investment objective, asset allocation, or portfolio construction process
A change in key personnel, ownership, or governance arrangements
Performance or risk outcomes that require further investigation
A change to fees, costs, platform availability, or implementation arrangements
A control incident, breach, or material operational issue
A change in relevant regulation, guidance, or internal policy
A change in the needs or characteristics of the intended client cohort

The purpose is not to identify a model that performs best in every period. It is to determine whether the solution remains well governed, transparent, appropriately resourced, and capable of delivering its stated objective for the clients for whom it is intended.

Turning due diligence into adviser value

A disciplined evaluation process supports more than initial selection. It helps advisers explain why a model has been chosen, set appropriate expectations, communicate portfolio changes and demonstrate the value of ongoing oversight.

The strongest process is one that can be repeated consistently, produces a clear evidence trail, and remains focused on client suitability and outcomes throughout the life of the recommendation.

For more information about evaluating model portfolios and the support available to advisers, connect with the State Street ETF Model Portfolio team.

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