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Unlock the Power of Personalization with Direct Indexing
Why Download This Guide?
With consumer demand for tailored investment strategies growing each year, financial advisors face mounting challenges in meeting client expectations while still maintaining operational efficiency. The Ultimate Guide to Direct Indexing is your roadmap to mastering these challenges and unlocking the full potential of direct indexing for your clients and advisory practice.
Here’s what you’ll learn:
- Boost Efficiency & Scale: Discover how direct indexing helps you streamline workflows, reduce reliance on outsourcing, and focus more time on client relationships.
- Personalize Client Portfolios at Scale: Learn how to align investments with client-specific ESG preferences, values, and financial goals without compromising performance.
- Optimize Tax Strategies: See how automated tax-loss harvesting transforms market volatility into year-round tax-saving opportunities.
- Position Yourself as a Leader: Stay ahead in a competitive market by delivering the personalized, transparent experiences today’s investors demand.
Frequently asked questions
What is Direct Indexing (also known as Custom or Personalized Indexing)?
Direct Indexing is a strategy that involves directly purchasing the individual securities that comprise an index, as opposed to investing in index funds or ETFs. This approach allows investors enhanced control over the selection of securities to align with personal values, investment preferences, and specific tax strategies like tax-loss harvesting.
What are the primary benefits of Direct Indexing?
- Tax Optimization: Direct Indexing offers potential tax benefits through active tax-loss harvesting. By selling underperforming securities, investors can realize losses to offset capital gains in other areas, potentially lowering their tax liabilities. Such benefits are typically unavailable with traditional index-tracking funds, as investors in those products do not own individual securities.
- Personalized Investing: Direct Indexing empowers investors to customize their portfolios to reflect their financial goals and personal values. Unlike index funds, which offer a fixed set of holdings, direct indexing allows investors to exclude or overweight specific securities based on their preferences.
Why does direct ownership of securities matter in Direct Indexing?
Direct ownership provides a high degree of personalization, allowing investors to reflect their unique values and investment strategies. This approach facilitates tax-loss harvesting, which could result in approximately 1% additional tax alpha, depending on market conditions—a level of customization and tax efficiency not matched by traditional funds.
Isn't it easier and more economical to buy an ETF?
The cost-effectiveness of direct indexing has improved due to zero-cost trading and fractional share offerings. These advances make direct indexing accessible without additional costs, while technological platforms handle the complexity of managing diversified portfolios.
Do I need a large capital outlay for Direct Indexing?
No, large capital is no longer a barrier thanks to fractional shares. Platforms may set minimum capital requirements, but offerings can start at as little as $50,000, making direct indexing accessible to a broader range of investors.