Majority of HNW Advisors Remain Unfamiliar with Direct Indexing, Finds Survey From Parametric and Cerulli
27 Abril 2022 - 11:30AM
Business Wire
Parametric Portfolio Associates LLC (Parametric), the leading
direct indexing provider, today released findings from a survey of
advisors serving high-net-worth (HNW) investors. Sponsored by
Parametric and conducted by Cerulli Associates, the survey revealed
that even though direct indexing is primed to grow at an annualized
rate of more than 12% over the next five years, the majority of
advisors surveyed were unfamiliar with the strategy despite
embracing the most valued benefits of it – tax management and
customized exposures.
Fielded in Q4 2021, The Advisor Perspective on Direct Indexing
survey indicated this surprising statistic – more than 50% of HNW
advisors remain unfamiliar with direct indexing. This comes at a
time when the strategy is experiencing rapid growth, totaling over
$362 billion in assets in 2020, nearly one-fifth of the industry’s
total retail separate account assets.1
“Despite all the growth and attention Direct Indexing has
received, our new survey shows there is still room for substantial
growth in advisor awareness and of the product and the values it
provides,” said Brian Langstraat, CEO of Parametric. “This suggests
that the next part of the growth curve could be even steeper than
some have projected. More and more investors and their advisors are
recognizing the value—the tax advantages, the flexibility, the
ability to tailor to client mandates—that these SMAs offer. As the
story of customization is told and adopted, it will help advisors
fulfill unique portfolio requirements for investors across the
wealth spectrum.”
Additional highlights from the survey include:
Key Findings:
- Active tax management is the top direct indexing customization
that advisors implement, followed by customized exposures.
- Tax management, tax-efficient transitions, custom-weighted
indexing, values alignment and charitable giving are among
advisors’ most valued benefits of direct indexing.
- Among advisors who avoid direct indexing entirely, the majority
claim they’re satisfied with the solutions they currently recommend
to clients, preferring to project the confidence that comes with
product familiarity and remaining in their comfort zone.
- Among the 12% of advisors currently using direct indexing,
broker-dealers are three times more likely to use direct indexing
than RIAs, largely due to the increased availability of direct
indexing platforms in their segment.
- Direct indexing allocations rise with AUM. Among advisors
managing $500 million or more, 19.2% of those assets are allocated
to SMAs versus 13.7% to ETFs.
- Surprisingly, these advisors are hesitant to discuss ESG with
individual investors. More than half of advisors wait for their
clients to broach the subject.
- Advisors across all channels and AUM brackets are more willing
than ever to put client assets into passively managed vehicles,
with nearly one-third noting they’re allocating 26% to 50% of their
AUM to passive products.
This survey follows Cerulli’s comprehensive report published in
August 2021, Improving Client Experience: Customizing with Direct
Indexing, which defined direct indexing, presented a five-year
growth projection of more than 12% and identified opportunities for
advisors. The new survey, The Advisor Perspective on Direct
Indexing, is available for download here. For more information on
how advisors can strengthen their partnerships with investors and
add value for their clients in a progressively more passive market,
visit Parametric’s website.
About Parametric
Parametric, part of Morgan Stanley Investment Management, the
asset management division of Morgan Stanley (NYSE: MS), uses
investment science to build and manage systematic investment
strategies and to implement custom portfolio solutions providing
clients with targeted investment exposures with control of costs
and taxes. Based on principles of intellectual rigor, ingenuity and
transparency, Parametric seeks to deliver repeatable client
outcomes with consistently high levels of service and maximum
efficiency. As of December 31, 2021, Parametric managed $428+
billion in assets on behalf of institutions, high-net-worth
individuals and fund investors. Headquartered in Seattle,
Parametric also has offices in Minneapolis, New York, Boston and
Westport, Connecticut. For more information, visit
parametricportfolio.com.
1 Cerulli Associates, “Improving Client Experience: Customizing
with Direct Indexing,” August 2021.
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