Overview

Direct indexing is more than a trend. It is a crucible for the changes reshaping the wealth management industry today. It automates the task of re-creating an index, which rendered into a basket of stocks, can be customized to client preferences. These may relate to tax management, factors like momentum or value, or the environmental, social, and governance (ESG) criteria in favor with Millennials and many affluent investors. 

In this decade alone, an ecosystem of fintech providers has emerged to help advisors serve a generation for whom investing to conscience is critical. API exchanges and self-serve functionality built off software development kits (SDKs) serve as their enablers. These tools subordinate the role of IT as information gatekeeper or bottleneck and reinforce a more strategic role for the advisor, a service narrative that emphasizes financial planning over portfolio management. 

As demographic trends and economic uncertainty drive demand for advice across North America and other developed markets, financial advisors are embracing digital and hybrid forms of advice delivery, notably those structured around planning. Jump-starting distribution will require operational support around the CRM and portfolio management systems, both of which function as nerve centers for the advisor. Security and workflow enhancements (including the uncluttering of the advisor desktop) must go hand-in-glove with the unbundling of systems architecture. Ultimately, the harnessing of client, reference, and transaction data should allow client-facing teams to shift their focus from products and sales toward realizing the higher-level charge implicit in the term “advisor.”