Direct Indexing and the Promise of Personalization

The power of direct indexing draws from the ability to automate what used to be the laborious and costly process of creating a unique portfolio for each investor. Ownership of individual securities supports high levels of transparency and personalization compared with pooled vehicles, and enables operational precision that model-based accounts, with their limited tracking and screening capabilities, fail to deliver.

The real impact of direct indexing, however, rests with delivering a compelling client experience. This experience follows from a shift in wealth manager focus from product to process, one ultimately centered on the needs of the investor. By aligning those needs with the advisor workflow, direct indexing offers a powerful antidote to the broader commoditization of wealth management. Asset managers, index providers, other generators of data, and technology vendors such as turnkey asset management programs (TAMPs) also can use direct indexing to improve their competitive positioning, if they move boldly to reinforce existing market advantages.

Key questions discussed in this report:

• How do direct-indexing platforms support the advisor and the advisor-client relationship?
• What are the strengths of direct indexing relative to traditional separately managed accounts (SMAs) and other competing solutions?
• What opportunities and challenges does direct indexing present to wealth managers?
• What are the implications for asset managers and other market participants, such as index providers and technology vendors?

Companies Mentioned:

Advisor Partners, ALLINDEX, Altium, Altruist, BNY Mellon| Pershing, Charles River, Charles Schwab, Envestnet, Ethic, eToro, First Affirmative, Franklin Templeton, HighTower, iCapital, Interactive Brokers, JPMorgan Asset Management, Moorgate Benchmarks, Morningstar, London Stock Exchange Group (LSEG), MerQube, MSCI, MyVest, Northfield Analytics, Objectway, Orion Advisor Solutions, Pathstone, Qontigo (Axioma), Robinhood, Rowboat Advisors, SIMON Markets, Smartleaf, SMartX, SEI, SS&C, Vanguard, Vestmark, VISE