What is direct indexing?
Unlike ETFs and mutual funds, which are essentially “wrappers” with a predetermined number of prescribed stocks, chosen by company analysts, direct indexing allows advisors to build their own customized portfolios for clients based on indexes or model portfolios – creating truly personalized investments for any account size.
The advantages of direct indexing include:
- The ability to customize portfolios to fit clients’ needs, including:
- Beliefs and values: Choose individual securities that align to clients’ personal values and avoid those that don’t
- Employment situation: Preclude being too heavily weighted in an employer’s stock or industry
- Tax needs: Optimize clients’ tax gains or losses by selling only the stocks that will help achieve their goal
- Lower costs: Unlike ETFs and mutual funds, direct indexes have no embedded product fees or management fees
- Fee transparency: Investors can see exactly what they own of each stock, and what they paid for it, in their statements