Displaying items by tag: direct indexing

Syntax Data has joined forces with FTSE Russell to bring its indices into the Syntax Direct platform, allowing financial advisors to build more customized investment strategies. This partnership enhances direct indexing, a fast-growing segment in wealth management, by giving advisors greater flexibility to tailor portfolios for clients. 

The demand for personalized investment solutions has surged, with assets in direct indexing swelling from $100 billion in 2015 to over $615 billion today, according to industry estimates. With the integration of FTSE Russell indices, advisors can refine portfolios based on specific factors such as market trends, risk preferences, and fundamental metrics.

 The platform also simplifies managing large, diversified benchmarks, making institutional-grade strategies more accessible in private wealth management. By combining customization with scalability, this collaboration enables advisors to deliver more precise and cost-effective investment solutions.

Finsum: Having access to Russell brings a lot of flexibility to investors when paired with direct indexing and particularly allow them to increase value exposure. 

While direct indexing strategies are gaining popularity, advisors show varied levels of adoption and interest in the approach. A recent survey revealed that 34% of advisors are either using or planning to use direct indexing, while 39% have no intention of adopting it. 

Interestingly, 28% remain open to considering it in the future, reflecting a mix of enthusiasm and hesitation within the advisory community. The high minimum investment requirements, limited familiarity with the strategy, and a preference for traditional active management may explain why some advisors have yet to embrace it. 

Advocates highlight the benefits of direct indexing, such as tax optimization, personalization, and the ability to tailor portfolios to individual values, like ESG or thematic investing. 

Finsum: With costs declining and competition increasing, demand for direct indexing is expected to grow, potentially making it a must-have tool for advisors seeking to remain competitive.

Direct indexing allows investors to own individual stocks in a customized portfolio, offering tailored market exposure, tax-loss harvesting, and alignment with personal goals. Unlike ETFs, which can only tax-loss harvest during broad market declines, direct indexing captures tax benefits throughout the year. 

Advisors increasingly use it as a core strategy for U.S. equity exposure, leveraging its tax advantages to offset gains from other parts of a client’s portfolio. Technology enables the efficient management of thousands of unique accounts, optimizing trades daily for greater customization and tax efficiency. 

It is also a powerful tool for diversifying concentrated stock positions or preparing for future liquidity events by accumulating tax-loss reserves. 

Finsum: When choosing a provider, factors such as investment performance, tax alpha, and client service are critical to the goals of direct indexing. 

Advisors remain divided on the adoption of direct indexing, despite its increasing popularity and benefits like tax efficiency and portfolio customization. A recent survey revealed that while 34% of respondents currently use or plan to use direct indexing, 39% have no plans to adopt it, and 28% are open to considering it in the future. 

Experts view the 62% engagement or consideration rate as promising but notes barriers such as high account minimums and misunderstandings about the strategy. Advocates highlight its advantages, including tax loss harvesting, personalized portfolios aligned with client values, and competitive performance compared to traditional ETFs. 

However, misconceptions persist, particularly around how capital loss generation works without sacrificing returns. 

Finsum: Advisors should start exposing themselves to direct indexing because we will see costs decrease and the tool become more standard over the decade. 

Strive Asset Management has launched direct indexing services on Fidelity and Schwab platforms, reaching a broad retail audience. These services emphasize daily tax-loss harvesting and pro-shareholder governance, avoiding ESG or DEI constraints. 

Powered by Vestmark’s VAST technology, the initiative aligns with Strive’s anti-ESG philosophy, aiming to deliver superior financial outcomes for clients. CEO Matt Cole highlighted the unique value of Strive’s approach, citing frequent drawdowns in large-cap equities that offer tax-harvesting opportunities. 

Founded in 2022 by Vivek Ramaswamy, now a key figure in President-elect Trump’s administration, Strive manages $1.7 billion in assets. Its ETFs focus purely on financial returns, contrasting with ESG-oriented funds by voting against ESG shareholder proposals.

Finsum: ESG and DEI oriented funds will have an uphill battle against the trump administration.