Direct Indexing: A Differentiator for Advisors in a Commoditizing Industry

While technology has enabled wealth managers to operate more efficiently and scale their businesses to serve more clients, it has also brought down the costs of many traditional investment services – to the point that investing has become largely commoditized. Digital platforms, “robo advisors,” and discount brokers can offer much of the investment management value chain for “free” or next to nothing.

So what is the traditional advisor’s value proposition in this new environment? How can wealth managers deliver and demonstrate the value of thoughtful, personalized portfolio construction and management in the client’s best interest?

One approach that continues to gain traction is direct indexing. While most industry participants have heard of this concept by now, widespread adoption has needed to be faster, with advisors citing time, technology, and the required expertise as barriers.

This whitepaper discusses how direct indexing can help implement tax loss harvesting strategies, accommodate individual preferences, meet ESG investing goals, and deliver a personalized client experience. It also previews some of the technologies that firms can leverage to provide differentiated offerings.