Key trends in portfolio management can get lost in the sound and fury of new product announcements. To cut through the cacophony, we asked industry experts to provide their thoughts on the portfolio trends and products with the brightest future to help advisors focus.
Their responses include detailed views on investment and strategic planning, and
many provide insights into the future of the advice business — regardless of the
Although Ben Johnson, director of Global ETF Research at Morningstar, doesn’t see
direct indexing — which replicates the performance of an index by buying the individual
securities instead of buying an ETF or mutual fund — replacing ETFs, others believe this
trend will impact how advisors build portfolios.
One advocate, Michael Kitces, the Nerd’s Eye View blogger and head of planning strategy at
Buckingham Wealth Partners, calls direct indexing “the most notable emerging investing trend.” It
“provides the potential for tax benefits (via tax loss harvesting), potential cost savings (eliminating the ETF
or mutual fund wrapper costs), is more feasible now that custodians charge zero commissions, and will be
even more feasible as more custodians roll out fractional shares,” he said.
“The trend is especially notable when advisors then begin to adapt the index ‘funds’ they use via direct
indexing, such as adapting them for factor investing or to construct ESG portfolios,” Kitces explained.
Brian Price, senior vice president of investment management for Commonwealth Financial, agrees: “The
ability to purchase fractional shares on many trading platforms has made direct indexing more accessible
for retail investors,” he said.
BY GINGER SZALA
for Uncertain Times
Industry experts highlight important trends in portfolio
products, investing and financial planning, and what
they mean for the business of wealth management —
in good times and bad.