Advisor software developer Altruist is to debut its own take on direct indexing for advisors sometime prior to May 25, according to an announcement. The investing option will be included in the firm’s “Strategist Suite” and uses fractional shares to lower the minimum investment to $2,000.
Portfolios relying on Altruist’s direct indexing will follow an index developed by Altruist that “tracks the top 500 U.S. stocks by float-adjusted market cap,” according to Adam Grealish, head of investments at Altruist. Currently there is no ability to customize the equities included in the index, but the firm wants to make “values-based screens” available “later this year,” he said.
The direct indexing will be available in taxable accounts, as well as traditional and Roth IRAs, Simplified Employee Pension (SEP) IRAs and Savings Incentive Match Plan for Employees (SIMPLE) IRAs.
A lack of customization limits the investment solution’s initial usefulness, said Travis Gatzemeier, an Altruist customer and founder of Kinetix Financial Planning, a $3.5 million AUM firm based in the Dallas-Fort Worth suburb of Flower Mound, Texas. Nevertheless, he’s still excited about the offering and said he sees “potential” in the feature.
“The purpose of direct indexing is to make indices customizable,” he said, calling this future ability to customize, potentially, the “biggest benefit.” However, he said that direct indexing also allows for tax-loss harvesting, which would help him manage larger portfolios.
Altruist will provide “regular rebalancing” to harvest tax losses, according to Grealish, while it works to build “active tax-loss harvesting.”
“We believe in implementing solutions that help [advisors] stay ahead of the curve in all facets of their practice,” said Jason Wenk, Altruist’s founder and CEO, in a statement. “Strategist will give advisors access to cutting-edge investment approaches that can significantly benefit their clients.”
Fees for the service top out at 18 basis points. They include a model marketplace fee of 12 basis points that, if not absorbed by the advisor, is automatically deducted each month. Strategist portfolios have blended ETF portfolio expense ratios ranging from two to six basis points, depending on the portfolio’s asset allocation. Clearing and custody of all securities are provided by Apex Clearing Corporation.
Financial services firms Charles Schwab and Fidelity have also introduced direct indexing solutions recently.
Schwab’s indexes are based on the Schwab 1000 Index, the S&P SmallCap 600 index and the MSCI KLD 400 Social Index. The firm charges 40 basis points for using the service and has a $100,000 account minimum. Schwab's offering is intended for taxable accounts and allows for the exclusion of up to three stocks per selected index.
Fidelity’s indexes are derived from the firm’s U.S. Large Cap Index and the Developed ex North America Focus Index (Net). The offering, which uses fractional shares, costs 40 basis points, has a $5,000 account minimum, and is intended for taxable accounts and allows for the exclusion of five stocks or two industries.
