Custom indexing demand rises
Demand for personalized portfolios is increasing and FTSE Russell says custom indexing solutions are becoming a mainstream way for advisors to deliver tax‑aware, bespoke exposures. (thewealthadvisor.com) The article notes direct indexing and customization tools are more accessible now, though they remain most compelling at larger account sizes. (thewealthadvisor.com)
FTSE Russell’s recent survey of more than 400 financial advisors found roughly three‑quarters say they currently use or plan to implement direct indexing within the next 12 months, and among advisors already using the strategy about two‑thirds intend to increase usage over that same period. (lseg.com) Industry sizing shows the product set driving that interest: direct indexing strategies closed year‑end 2024 with $864.3 billion in assets, although only a minority of advisors report using them today — Cerulli found about 18% of advisors in 2024 were using direct indexing. (cerulli.com) Direct indexing means owning the individual securities that make up an index rather than buying a pooled vehicle (so clients can harvest tax losses, exclude stocks, or add ESG screens at the security level), and FTSE Russell says its custom indexing work produces institutional‑grade benchmarks — formal rulesets used to measure or construct a portfolio — that are purpose‑built for these custom, security‑level implementations. (thewealthadvisor.com) (lseg.com) FTSE Russell has been making those indices easier to use through technology and distribution deals: its indices were added to Syntax Data’s Syntax Direct custom index platform to give advisors quick tools for customization, back‑testing, reporting and narrower constituent sets for private‑wealth accounts. (businesswire.com) FTSE Russell also announced a collaboration with Salt Financial to design risk‑managed, engineered indices for annuities and structured products, a move aimed at product issuers rather than retail wrappers. (prnewswire.com) The firm’s survey highlights the practical friction advisors still face: common barriers named were lack of client demand, complexity, and implementation, with 79% of advisors expecting some friction and only 13% saying implementation is “very easy.” (lseg.com) Adoption patterns vary by channel and age: younger “NextGen” advisors and wirehouse channels show the highest uptake — 63% of advisors under 45 view direct indexing as essential and nearly half of wirehouse advisors report usage — while model‑delivered direct indexing (pre‑built, centrally managed strategies sold to advisors) remains a much smaller slice of the market at about $17.2 billion versus manager‑traded implementations. (lseg.com) (cerulli.com)
