Morningstar has become the most recent business to offer a direct indexing investing service, as part of an industry-wide trend.
In addition, by investing in the underlying equities rather than an exchange-traded fund or mutual fund, direct indexing replicates an index of securities. Investors may be able to match their holdings to their values with the use of the technique. In fact, this enables more tailored portfolios than are possible with index ETFs or mutual funds.
Besides, more individual investors may now afford to directly own the underlying assets thanks to direct indexing. Also, direct indexing enables them to choose extra services like tax-loss harvesting, tax-lot consideration, and holding period management, according to Morningstar.
One of Morningstar Wealth’s first significant product introductions is to offer Morningstar Direct Indexing. Moreover, Morningstar made the announcement of the new Wealth Management Solutions segment on February 3.
The Morningstar Wealth Platform will be the first place where direct indexing portfolios will be made available, according to the business.
In order to provide better personalization, automation, and tax efficiency for advisors and their investors, Morningstar Direct Indexing “draws from industry-leading research, technology, and insights across the Morningstar company,” stated Morningstar Wealth.
Daniel Needham, president of Morningstar Wealth, said that advisors were looking for methods to fulfill client interest in new investment options, particularly those that allowed customization and personalization.
The ability to “intuitively and effectively tailor portfolios in numerous different ways and have transparency into the impact of those choices” was another feature of the product, according to the speaker.
However, Morningstar Wealth stated that the launch of its most recent investment option “comes amid rising demand in direct indexing.”
According to the business, about 61% of advisers say they use or are thinking about adopting direct indexing. Regarding additional study, direct indexing will increase by 12.4% yearly between 2021 and 2026, outpacing the estimated 11.3% annual growth for ETFs, the company predicted.
