What You Need to Know
- Few advisors who are aware of direct indexing are using the strategy, a survey found.
- It also found less than half of those advisors plan to do so.
- One major sticking point: the time-consuming nature of managing portfolios.
Direct indexing has been touted by some as perhaps the next big thing to help advisors align portfolios with their clients’ values, but many advisors are not yet using the strategy.
According to a new survey from Broadridge Financial Solutions, few advisors aware of direct indexing are using the strategy and less than half who know about the strategy are planning to use it.
Broadridge surveyed 400 advisors online asking them about their familiarity with and use of direct indexing. Eight-four percent of the respondents were aware of direct indexing; 16% had no awareness of the strategy.
With direct indexing, advisors replicate an index of securities by purchasing the securities underlying an index instead of an index ETF or mutual fund, excluding some securities and overweighting others based on a client’s preferences.
Of the 84% of advisors who knew about direct indexing, only 10% were currently using the strategy and 5% had used it in the past. Less than half of the advisors who knew of the strategy said they were considering using it. Thirty-nine percent of advisors said they were not considering using it.