Displaying items by tag: vanguard

Fidelity made a splash with its announcement of a $5,000 minimum direct indexing product a couple of weeks ago, and there has been a rush by Vanguard, JPMorgan, and BlackRock to acquire direct indexing firms. Goldman has been a long-time investor provider of direct indexing services, in fact over 20 years ago. Goldman specialized in wealthier clients with a minimum investment of $250,000. Goldman offers software tools for clients to use to add and drop stocks from indices. Most of the time they do this for tax purposes but sometimes clients customize by dropping equity sinners like fossil fuels or prisons. Goldman's direct indexing is a form of active management with higher fees than passive funds, but certainly more futures.

FINSUM: The advent of direct indexing for all will be an interesting follow as lower minimums become the new norm.

Fidelity is about to take direct indexing to a whole new level. The asset manager/custodian/broker-dealer is launching its new Fidelity managed FidFolios product, which is a retail-focused direct indexing suite with only a $5,000 minimum and a 0.40% fee. According to Think Advisor “The Fidelity Managed FidFolios combines direct indexing with fractional share trading, which allows clients to allocate assets among multiple positions based on dollar amount rather than share size”. Morningstar gives context to the launch, saying “This is the most mainstream form of direct indexing from a most mainline asset management and provider of investor services seen to date”.

FINSUM: Direct indexing is a heated battleground for asset managers right now, with Fidelity, Vanguard and others in the mix. This seems like a big step.

Direct Indexing is the process of holding the stocks in the weights of the underlying Index, rather than buying an ETF that tracks an index, and this new opportunity is being adopted by financial heavyweight Charles Schwab and will be available to investors. Starting with the large-cap Schwab 1000 Index, S&P Small Cap 600 Index and MSCI KLD 400 Social Index, Schwab will be available to mix and match to customize a portfolio to hit the investor’s exact needs. However, this option won’t be available to just any investor. The indexing platform will require a $100,000 account size. Adoption of direct index investing is one piece of Schwab’s expansion into personal investing, that goes hand-in-hand with environmental, social, and governance investing and other thematic investing.

FINSUM: Schwab is the latest of Vanguard, Fidelity, BlackRock and Morgan Stanley to jump into index investing. However Schwab’s pricing format is not revealed and its advantages over a low fee ETF are not yet clear.

(New York)

Morningstar has become a leader in model coverage. The firm covers several hundred models and gives each multiple ratings. As the model world continues to grow, this is getting more and more useful. Here is our third installment of our coverage of Morningstar’s rankings, with the top 5 covered. The rankings: #5 is American Funds Growth (silver rating); #4 is American Funds Growth & Income (silver); #3 is American Funds Income; #2 is Vanguard Core (gold); and #1 is BlackRock Target Allocation ETF (gold).

FINSUM: There is a pretty low diversity of providers in the top 15, but this speaks to the expertise a handful of firms have developed in this space.

In our continued coverage of Morningstar’s top model portfolios, today we are featuring those ranked 6-10. Morningstar is soon going to double the coverage of the growing model portfolio universe, which is great news for advisors having trouble deciding on which to choose. Without further delay, here are the rankings. Number 10: Vanguard S&P (Silver rating). Number 9: Vanguard Russell (Silver rating). Number 8: Vanguard CRSP (Silver rating). Number 7: American Funds Tax Aware Income (Silver rating). Number 6: American Funds Tax Aware Growth and Income (Silver rating).

FINSUM: Well the list isn’t very diverse in terms of managers, but the Russell model from Vanguard looks like an interesting way to play small caps. Additionally, given Biden’s proposals, tax aware income would be a wise strategy in which to take a holistic approach.