Some advisors think of model portfolios as a tool for advisors that is rigid: a pre-selected allocation not to be tampered with. However, the model portfolio’s true advantage is that it brings an element of customization. This varies based on how an advisor implements the options, but overall because investors own the underlying asset, unlike a mutual fund they can add/drop for customization. This gives investors an edge for tax loss harvesting or tweaking to add a growth stock for example. To add to that models are relatively fee efficient particularly when it comes to their mutual fund counterparts while bringing most of the same options.

Finsum: A model portfolio can also be selected for its inherent traits as well and provide advisors with more flexibility than they are perceived to have.

Direct Indexing is being touted as the best way to generate tax alpha in a portfolio but is it all that it's cracked up to be? Experts say it has limits and diminishing marginal returns over time because as stocks are dropped, replacements with a lower cost basis will be more expensive to unload later on. Moreover one of the less talked about aspects is that as opportunities narrow as stock is unloaded there is less upside to growth opportunities as the portfolio is smaller. Investors should look to capitalize on direct indexing as they offload specific accounts for inheritance and retirement which is a relatively more minor portion of the portfolio.

Finsum: There may be a shift from custom indexing as a primary ESG focus if it fails to deliver tax alpha and is better suited to dropping greenwashers.