Page 23 - Investment Advisor June 2022

move forward. As we transitioned to a been openly sharing this plan with them ago to enter this business with an excel-
more horizontal team, it was my turn for so long. lent mentor. It’s bittersweet to see Shelly
to make sacrifices so we could hire That time allowed Shelly to slow- go but also exciting to be able to create
the right people. However, every single ly transition to a consulting type role a new roadmap and vision for my own
time an investment was made, it paid while I met with her clients one-on- succession plan.
back in spades. one to establish our own relationship. It While each individual practice will
Two years ago, we set the date for also allowed us to consult specialists at have a unique set of needs, starting early,
Shelly’s retirement for January 2022 Raymond James to assist us in executing remaining flexible, asking for objective
and began communicating it to clients. the finer details of our deal structure. coaching and consulting and being open
Our letter to clients was well received, We have now completed the tran- to business investments that will benefit
despite the wild markets of the past sition, and I’m very grateful for the you in the long term have been essential
couple years, in part because we had opportunity I was given so many years for us through this process.

Most HNW Advisors Still Find Direct

Indexing a Puzzle: Survey

irect indexing is primed to grow at these SMAs offer,” he said. “As the story Among the 12% of advisors who use
Dan annualized rate of 12% over the of customization is told and adopted, it direct indexing, broker-dealers are
next five years, but more than half of will help advisors fulfill unique portfolio three times as likely as RIAs to do so,
advisors to high-net-worth investors in requirements for investors across the mainly because of the increased avail-
a new survey were unfamiliar with the wealth spectrum.” ability of direct indexing platforms in
strategy, Parametric Portfolio Associates Cerulli fielded the survey in the their segment.
reported in late April. fourth quarter among 200 independent The survey results also showed that
At the same time, these advisors and hybrid RIAs, wirehouses, national direct indexing allocations rise with
embrace the strategy’s most valued ben- and regional broker-dealers, and inde- assets under management. Among advi-
efits: tax management and customized pendent broker-dealers. These advisors sors that manage $500 million or more,
exposures. manage an average of $250 million in 19.2% of those assets are allocated to
“Direct indexing” is the new name assets, and have been in their positions SMAs versus 13.7% to ETFs.
attached to custom passive separate- for an average of 20.7 years. One result Parametric did find sur-
ly managed accounts, according to prising was advisors’ hesitancy in dis-
Parametric. The firm said it has been rec- TAX ATTRACTION cussing environmental, social and
ommending tax-managed custom SMAs The survey found that active tax man- governance factors with individual
to investors and advisors since 1992. agement is the top direct indexing investors. More than half of advisors
Assets in the strategy totaled some customization that advisors imple- said they wait for their clients to broach
$362 billion in 2020, nearly one-fifth ment, followed by customized expo- the subject.
of the industry’s total retail separate sures. Advisors place the highest value Advisors across all channels and
account assets, the company said, citing on these direct indexing benefits: tax asset brackets are more willing
research from Cerulli Associates. management, tax-efficient transitions, than ever to put client assets into
Survey results suggest that the next custom-weighted indexing, values align- passively managed vehicles, with
part of the growth curve could be even ment and efficient charitable giving. nearly one-third noting they’re
steeper than some have projected, Fifty-nine percent of surveyed advisors allocating 26% to 50% of their AUM
pointed out Parametric’s CEO Brian who avoid direct indexing entirely said to passive products.
Langstraat in a statement. they are satisfied with the solutions they
“More and more investors and their currently recommend to clients. They pre- Ilona Box is senior vice president,
advisors are recognizing the value — the fer to project the confidence that comes Investments, Concierge Wealth Management
tax advantages, the flexibility, the abil- with product familiarity and remaining in of Raymond James. Michael Fischer is a
ity to tailor to client mandates — that their comfort zone, Parametric said. regular ThinkAdvisor contributor.

JUNE 2022 INVESTMENT ADVISOR 21