From growth to governance: How due diligence is shaping managed account selection

From product selection to partnership decision

Selecting a model partner to manage asset allocation within a managed account is no longer just an investment decision. It is increasingly viewed as a long-term partnership decision. This shift is driving a more structured and disciplined approach to due diligence. Advisers are no longer assessing models on performance alone, but taking a multi-dimensional view of providers across several critical areas.

Best practice due diligence involves evaluating:

• Investment philosophy and process
• Portfolio construction and risk management
• Fees and total cost of ownership
• Operational robustness and scalability
• Reputation, stability and capability of the provider

Importantly, due diligence is not just about selection it is also a form of risk mitigation. A robust framework helps advisers build confidence that a model will behave as expected across market cycles and continue to deliver on client outcomes over time. 

More choice, greater selectivity

As assets grow, so too does the range of available investment options. However, this expanding opportunity set is driving greater selectivity, not broader adoption. On average in 2026, advisers report having around 27 models available on their Approved Product Lists (APLs), yet only approximately 15 are actively recommended to clients, equating to just 55% utilisation.²

This gap reflects a broader shift in due diligence behaviour. As the number of available models increases, advisers are applying more rigorous and structured evaluation frameworks, narrowing their recommended line-up to those that best meet client needs and align to their investment philosophy.

Rather than increasing usage, greater choice is elevating the bar for selection. Creating deeper scrutiny around client suitability, duplication across strategies, and the time and discipline required to complete effective due diligence.

Governance is professionalising

As the complexity of model selection increases, so too does the governance around due diligence.

Most advisers are no longer conducting due diligence independently. Around two-thirds rely on investment committees, CIOs, or licensees to undertake the process, while only approximately 20% complete due diligence themselves.² This reflects a broader industry trend toward professionalised governance, where structured oversight supports higher quality and more scalable decision-making.

Importantly, the approach to due diligence varies by practice size. Larger practices (5+ advisers) are more likely to rely on a dedicated investment committee or CIO (around 60%)². Compared to smaller practices tend to rely more on licensees or internal processes.

This highlights that there is no one-size-fits-all approach, but the direction of travel is clear: governance frameworks are becoming more formalised and centralised.

What matters most in model selection

While performance remains a key consideration, adviser preferences are evolving.

The top three factors for advisers in 2026 influencing managed account model selection are:

1. Performance
2. Availability on the adviser’s primary platform
3. Fees

However, advisers are increasingly recognising the importance of broader considerations. Globally, there has been a shift in the relative importance placed on performance alone. Price, communication, and the provider’s long-term commitment are now equally important in supporting the adviser’s overall client value proposition. This reflects a more holistic view of value, one that extends beyond returns to encompass the value proposition for the end investor. 

A best practice framework for due diligence

As model selection evolves, a structured framework is critical. State Street has developed a comprehensive due diligence framework to guide model portfolio selection and help differentiate providers.

A structured, multi-dimensional approach enables advisers to navigate complexity, mitigate risk, and deliver consistent, high-quality outcomes for clients. To explore how this framework can support your process and to learn more about State Street’s ETF model portfolio offering connect with the State Street ETF Model Portfolio Team.