Vestmark: What Direct Indexing Means For Advisors

(NASDAQ) Direct indexing is increasingly becoming a core offering for many financial advisors. Maybe the best indication of its growth is that there have been 12 major acquisitions by wealth management firms of direct indexing providers over the past couple of years.

Although its ubiquity and availability to all sorts of investors is a recent development, direct indexing has been around for many years albeit only for high-net-worth investors. In a recent SmartAsset interview of Vestmark’s SVP of Direct Indexing, Dave Gordon, he discussed what financial advisors need to know, and why wealth management firms are so bullish on the trend. 

Gordon cites the growth of direct indexing due to clients demanding more customization and lower tax bills while wanting to retain the benefits of low-cost index investing. Direct indexing is a way for clients to have their cake and eat it as well due to technology which is making it possible for firms to offer these services to all types of clients. 

However, there are some differences in terms of direct indexing offerings and approaches. For instance, some direct indexing providers will rebalance losing positions into sector or index ETFs for a temporary period to maintain factor scores and then re-invest in the same securities while others will choose to invest in different securities with similar factor scores. 

Overall, he believes that direct indexing is more about data and technology than it is about securities and investing. Therefore, he believes in finding the providers with the best platform and resources.


More Articles