Displaying items by tag: personalization

While there is a difference in opinions as to how much direct indexing will take market share away from ETFs, there is no doubt that the strategy is growing. In fact, personalized portfolios in general are starting to really take shape. A big reason for this is that volatility is expected to continue next year and many investors want more control over their portfolios. While direct indexing lets investors cherry-pick which stocks to buy in a benchmark index, Edward Jones recently announced that it is providing advisors with a new and more personalized investing model for clients using ETFs and mutual funds. According to documents filed at the SEC, the personalized research models will consider client specifics such as existing assets, potential capital gains and losses, and the characteristics of the overall portfolio. Edward Jones is initially introducing these models on a limited basis. According to Scott Smith, director of advice relationships at Cerulli Associates, the personalized research models exemplify an industry trend toward personalization. He stated, “We’re seeing this across the industry, from direct indexing, where you’re knocking out individual securities, to this, where you’re tilting the portfolio. It’s all about using scalable technology to offer better client solutions.”

Finsum:As part of the trend towards personalized portfolios, Edward Jones recently announced that it will offer personalized research models using mutual funds and ETFs.

The rumble for a trend called direct indexing seems to be accelerating, as a burgeoning number of investors are displaying a demand for specialized portfolios, according to markettradingessentials.com. The upshot: eschewing ownership of a mutual or exchange traded fund, direct indexing’s flashing the wallet on stocks of an index, the site continued. The idea’s to hit to hit paydirt on, for example, tax efficiency, diversification or values-based investing.

“It says a lot that these large fund providers are leaning into direct indexing,” said Adam Grealish, head of investments at Altruist, an advisor platform with a direct indexing product. So, in light of the ascension of direct indexing, investors might be asking, pre tell, how to build a portfolio in which this strategy’s incorporated, according to corporate.vanguard.com. Well, presto, investors can cull ways to meet that goal through a framework available in Personalized indexing: A portfolio construction plan, a Vanguard research paper recently published.

“Our research represents a sensible starting point for potential direct indexing investors who want to include this strategy in their portfolios,” said Vanguard senior investment strategist Kevin Khang, Ph.D., one of the paper’s authors.

Model portfolios continue to grow in prominence among advisors. Every quarter, a higher percentage of advisors are adopting models and AUM has been growing considerably. Some evidence suggests a lot of the AUM growth is coming from some “power users” but the movement is still broad-based. On the back of that growth, Fidelity is expanding its suite of popular model portfolios. The company has launched Fidelity Target Allocation Tax-Aware Model Portfolios, which include nine equity and fixed income mixes, each versioned for I and Z share classes. The models are available through its managed account platform, Fidelity Managed Account Xchange (FMAX), and the Envestnet platform.

FINSUM: Models are making it easier and easier for advisors to manage money and save time, which boosts margins and enhances client service overall.

Russia’s invasion of Ukraine has triggered tons of sanctions from the west and many of those cut off Russian companies or Russian financers. Direct indexing has been put in one of the best positions of many financial products as they had some of the tiniest exposure to ADRs. With a meager 1% exposure, these portfolios have been left in a fairly healthy position all things considered. Meanwhile, major index companies like MSCI and FTSE Russel have raced to remove any Russian securities. Moreover, Vanguard and BlackRock as well as other major mutual funds were given until May 25 by the Treasury to find an off-shore buyer for Russian stocks. Direct index company dimensional funds have added Russia to a DNP list and have committed to rid of all their Russian stocks.

Finsum: Many funds were able to quickly dump Russian stocks, however, energy prices could be a more difficult problem to navigate.

Model portfolios have been a hot topic with advisors and asset managers over the last couple years. Models tend to have nice benefits for both advisors and fund providers as they save advisors time gather up assets for managers. To back this up a new survey by Escalent shows that models are growing in popularity. Models are growing in number and in assets but they are primarily expanding among a small group of advisor power users. 4 out of 5 advisors say they don’t plan to expand their model use in the near term. The power users on the other hand say they love models because they free up their time to grow their client base and spend time on other planning.

FINSUM: Models are a major opportunity for advisors since they can outsource a very time consuming task—portfolio construction—thus freeing time and capacity to take on more clients.