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wealthies-exec-roundtable-panel.jpg Photo by Megan Green
Advisors and executives participated in roundtable discussions at the afternoon sessions of the 2022 Industry Awards

Even Tech Execs Ask, ‘What Is Direct Indexing?’ 

The latest buzzword in wealth management has advisors scratching their heads. 

Clients aren’t asking for direct indexing—in fact, most of them have never even heard of the term, a panel of advisors and tech executives said at the Industry Awards afternoon sessions earlier this month. 

“They’re just not that sophisticated of investors,” said Megan Meade, CEO of The Pacific Financial Group. “They don’t have the assets for that. Nor do they need that level of tax efficiency.” 

While direct indexing, which allows investors to replicate an index by selecting and buying its components, is the latest buzzword in the wealth management space and hasn’t fully caught on yet, that hasn’t stopped big name asset managers like Goldman Sachs, Fidelity, Vanguard, Pershing, Schwab, Franklin Templeton and more from acquiring firms and building out offerings that focus on the investment strategy.  

Why? To be ready for when direct indexing has enough assets to be meaningful, much like how ESG investing turned from buzzword into a bona fide strategy in what seemed like just a few short years. 

“For something like this to catch up, it must have application and scale,” said Tony Bacarella, senior vice president and director of case planning at Sigma Financial. “This is so specific that we really haven’t seen anything at scale where we can bring it to our clients.” 

Penny Phillips, president and co-founder of Journey Strategic Wealth, said her firm does offer direct indexing to clients through Adhesion Wealth and other strategies, but the bigger problem is the disconnect between the industry and clients.  

“We don’t talk to our clients the way we talk to each other,” she said. “The average consumer has never even heard of this. It is a value add. They’re never going to bring it up for you.” 

Bobby White, the founder and CEO of RFG Advisory, added that clients aren’t asking for direct indexing—in fact “half of our clients don’t even know the true difference between an ETF and a mutual fund. 

“That’s what they’re trusting their advisor for,” he said. 

More than a few executives in the advisor technology industry are uncertain about the value of direct indexing, too. 

“I am very skeptical about direct indexing as a way to offer personalization,” said J. Helen Yang, founder and CEO of Andes Wealth Technologies, which is a provider of risk assessment, analytics, personalization and onboarding technology.  

“To me, the way to personalization is not to customize portfolios—there are certain needs for that—but I think it's really to provide personalized experiences. Your conversations are to point to their specific portfolios to their specific circumstances. I think this is what we should focus on instead of creating portfolios that may give them the impression of personalization, but where you are not really delivering the value of personalization. “ 

Craig Uhlenkott, a vice president of product at, which is a technology consultancy and provider of a cloud-native integration-platform-as-a-service to independent broker/dealers and advisory firms, expressed uncertainty over its value as well. 

“I am certainly far from an expert in this space, but just speaking as an investor and, the way that I selected my advisor who is kind of an old-school stock picker that has me in 25 to 30 positions and I know those positions. I don't quite understand directive indexing and having 200 or 300 different equities, how do you even understand or can follow that many?” he said. 

Adam Holt, CEO and founder of Asset-Map, explained direct indexing's draw. 

“The land grab is why you can't miss this marketplace,” he said. “It's the difference between all of us having Netflix, HBO Max or Disney [et al]. All of them have the same exact user experience in the front … but each member in your family gets a customized profile—it is the same content, same 8,000 movies or in the case of direct indexing stocks but they're putting forth in front of you the things that matter to you, and that you're going to have a proclivity toward—children have a different set than my wife or than me. 

“The same thing is true with the future of direct index investing. Let’s say I want to buy the S&P and I'd pay 10 basis points and I can eliminate tobacco and firearms, and I can feel good about my investments,” he said. “That is the future. And that's why they're grabbing it—now. It's not going to serve 100% of us in this room, but it's going to serve a market that wants to customize at the lowest possible cost.” 

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