Friday, 29 April 2022 12:45

Wealthy Investors Undervalue Direct Indexing

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Direct indexing seems targeted at high-net-worth individuals. They have huge tax incentives, a decent fee structure, and usually high minimums, but there is just one problem: they don’t know about them. According to a survey by Parametric Portfolio Associates over half of high-net-worth are unfamiliar with direct indexing. This is odd because it's one of the fastest-growing market segments expected to grow at 12% each year over the next half-decade. The survey also finds that advisors that do recommend direct indexing, lean mostly on the tax structure and benefits that they can capitalize on.

Finsum: Investors need to be aware of the benefits of custom indexing, the tax benefits tend to outperform fees, so they can edge out traditional ETFs. 

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