Issue link: https://resources.envestnet.com/i/1527485
In turn, financial advisors are increasingly turning to technology to help them navigate the complexity, leveraging sophisticated algorithms and data analytics to identify the most suitable investment strategies for individual clients. While technology will play an important role in shaping the future of financial advising, the human element will remain critical, as clients will continue to rely on their advisors' experience, judgment, and personal relationships. This opens opportunities for financial advisors to improve upon the standard managed account portfolio, which typically consists of a mix of equities and fixed income securities. By leveraging technology and partnering with asset managers who offer innovative product categories, advisors may be able to create more sophisticated and customized investment portfolios that can better meet their clients' individual needs and objectives. The application of personalization, education, and relationship-building in the financial advising industry, as well as the potential for technology to help drive innovation will help create better investment outcomes for clients. Examples of Hyper-Personalized Solutions Personalized Direct Indexing While the term direct indexing may have been coined only recently, its underlying strategy doesn't represent a new approach to investing. In fact, it traces its roots to the introduction of the first index fund 50 years ago, although, it has become increasingly popular in recent years. In its purest form, direct indexing involves replicating an index of investments with individual securities instead of purchasing an index fund or ETF. For example, the Dow Jones Industrial Average could be directly indexed through buying the shares of its 30 constituents in proportion to the index's weightings. Direct indexing is accomplished through a separately managed account, and, according to a report by Cerulli Associates from their 2021 "U.S. Retail Investor Products and Platforms 2021: Capturing Opportunities in an Evolving Landscape," more than $730 billion is forecast to be directly indexed by 2026. However, direct indexing today encompasses far more than simply matching an index. Personalized indexing represents a further development of direct indexing that enables customized solutions, particularly for high-net-worth investors. This allows the construction of portfolios that are customizable across a range of characteristics and preferences. Ways to Personalize Client Portfolios © 2023 Envestnet, Inc. All rights reserved. For one-on-one use for client's Financial Advisor only. 8