Direct indexing

The future of customised investing in Australia and why financial advisers should be paying attention

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In the ever-evolving landscape of financial markets, the quest for personalised investment solutions has never been more critical.

As the founder and chief executive of Brief-case, I have witnessed firsthand the transforma-tive power of direct indexing, a revolutionary approach that is reshaping the investment land-scape in Australia.

This piece explores the future of customised investing in Australia, my journey at Black-Rock, how direct indexing works, its popularity in the US, and why financial advisers can stand apart from their peers by using this innovative strategy.

The future of customised investing in Australia

The disruption seen in the funds management world, driven by ETF adoption, is nothing short of remarkable. Ease of access, low cost, and full transparency coupled with the in-ability of most active managers to outperform their benchmarks - have made ETFs a popular choice among investors. However, as with any successful innovation, ETFs are now facing challenges and may soon be overtaken. A new investment approach called direct indexing of fers the customisable nature of traditional stock picking, along with the simplicity and diversifi-cation of ETFs, providing a compelling alterna-tive to both.

Direct indexing is the fastest-growing invest-ment mechanism in the US, and it is transform-ing the way investors build and manage port-folios. Unlike traditional index funds or ETFs, where investors hold units in a pooled invest-ment vehicle, direct indexing allows investors to own a custom basket of underlying securities of an index that is designed to track the bench-mark of choice. Monitored daily, direct index-ing technology ensures that every investor's custom basket of securities continues to track its underlying index, with daily portfolio manage-ment handled by technology.

My journey at BlackRock