Recent developments in the wealth management space are expected to fuel the adoption of direct indexing by advisors over the next few years. We previously reported that direct indexing is expected to grow at an annualized rate of 12.3%, according to Cerulli Associates. In a separate survey by FTSE Russell in conjunction with Aite-Novarica, 80% of wealth and asset management firms expressed major interest in offering direct-indexing products to advisors, with 76% ranking the strategy as a top priority over the next year. Developments such as zero-commission trading and fractional shares are expected to help fuel the adoption of direct indexing among advisors. For instance, Charles Schwab and Fidelity both launched direct-indexing offerings last year with low investment minimums at $100,000 and $5,000, respectively. This could potentially bring these strategies into the mainstream. In addition, Fidelity's strategy incorporates fractional shares, while Altruist launched a direct-indexing product last April with a $2,000 minimum. Plus, according to an FTSE Russell spokesperson, “More large custodians and other players entering the space could fuel adoption among registered investment advisors.” Ninety percent of firms polled by FTSE Russell ranked RIAs as a major opportunity for the adoption and distribution of these strategies.
Finsum:Recent developments such as low investment minimums, fractional shares, and more players entering the space are expected to help fuel the adoption of direct indexing among advisors.