But the hitch with that strategy could be the Department of Labor's conflict-of-interest rule, which is giving managed account sponsors motivation to reduce the risk of bad outcomes in client portfolios.

Subpar outcomes pose risk to a firm if the sponsor knowingly allows advisors to manage underperforming client portfolios—particularly when the home office has a better-performing portfolio with a similar risk level available.

Previous studies by Cerulli, the report says, find that advisor portfolios generally underperform similar portfolios managed by home-office personnel. "Although advisors love the flexibility afforded by rep-as-portfolio manager (RPM) programs, many are not good portfolio managers," it says.

Not only that, but as firms seek to lower their risk from the DOL rule, executives at managed account firms are looking for ways to limit the discretion of advisors who do a poor job of managing client portfolios.

An executive at a large distributor is quoted saying, "RPM advisors are already constrained in what they can do, but there is some tightening [we are doing] around models and products. We have more work to do to evaluate performance. We are already looking at the tails for advisors to see if they are underperforming. There are already rules [regarding] the number of securities in a portfolio, concentration risk, etc."

But advisors themselves are looking for more discretion, not less, and look within their own firms for portfolio ideas rather than seeking outside advice from a home-office or third-party strategist.

Also, the report points out that advisors are "emotionally invested" in managing client assets, and also feel the need to justify their fees—both of which are reasons for them to resist home-office efforts to entice them into home-office portfolios.

So firms are positioning outsourcing as a positive, encouraging advisors to view it as a means of growing their practices by offloading portfolio management and focusing instead on client development.