Page 18 - Investment Advisor - November 2021

ETF ADVISOR

next progression of investing through expects “direct/custom indexing will In addition, said Fidelity, fractional
indexing, ETFs and direct indexing,” ultimately be an arrow in the quiver of trading makes it easier for advisors to
said O’Shaughnessy. every major asset manager.” address tactical situations such as rais-
Custom indexing has been growing in Cerulli Associates has projected that ing cash from high-priced securities or
popularity as investors, especially those direct indexing assets, which current- reducing concentrated positions in simi-
working with advisors, increasingly want ly total over $300 billion in separately lar securities previously bought at a low
customization in investment portfolios managed accounts, will grow at a 12.4% price and subject to large capital gains
to reflect personal values. The strategy annualized rate over the next five years, when sold.
involves investing in some, though not even topping the projected growth rate The new trading capability for advisors
all, stocks in a market index and adjust- for ETFs of 11.3%. builds on the firm’s fractional share offer-
ing their weights, based on consumer ing for retail investors, known as “Stocks
preferences. It has grown along with the FIDELITY ROLLA OUR by the Slice,” introduced last January.
increased demand for investments based FRACTIONAL SHARES Fidelity said fractional share trades
on environmental, social and governance Fidelity Institutional has started rolling are available through Wealthscape, its
factors, as well as other consumer invest- out fractional share trading for stocks advisor technology platform, must be
ment preferences. and ETFs to advisors. The new capabil- market or limit orders, and are good
Ben Johnson, director of global ETF ity allows advisors to offer proprietary for one day only. Fidelity will execute
research for Morningstar to Investment strategies to a broader set of clients, all fractional share trades in real time
advisor that “Software is eating the asset including younger clients, at lower mini- during market hours, unlike some firms
management business” and “ the land mums, and helps advisors build more that execute such trades at the end of
grab for direct indexing capabilities is customized portfolios based on clients’ the trading session or wait until multiple
the latest evidence of that trend.” He needs and desires. orders add up to full shares.

Perspective

changes

everything |

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