How SAM makes direct indexes as easy to use as ETFs

Direct indexing is great, but with most providers, it’s also a headache. Relative to managing a book of ETFs and mutual funds, working with direct indexes is operationally complex. Every time you invest cash, you have to figure out how much goes to your direct index provider. Every time you withdraw cash, you have to figure out how much to request from your direct index provider. Asset class rebalancing is even more complicated. And good luck managing wash sales across the entire account. 

We’re different. We believe Smartleaf Asset Management (SAM) has the easiest-to-use direct indexes on the market. How easy? Here’s a step-by-step guide to replacing an ETF in a client’s portfolio with a comparable direct index:

Step 1: select a direct index in the pull down menu below the ETF

That’s it. There is no Step 2. 

And once you replace the ETF with a direct index, there are no extra steps to invest or withdraw cash. No extra steps for asset class rebalancing. No extra steps for wash sale avoidance. Nothing. Working with a direct index is as easy as working with an ETF.

Direct indexes come with customization options, such as security and values-based constraints, that aren’t available with an ETF. But selecting those options is easy. They're just selections on a pull-down menu, and implementing the customization choices requires no ongoing management effort by the advisor. 

What makes SAM’s direct indexes easier to use? We do two things differently than most direct indexes providers.

First, we mostly manage an investor's entire portfolio, not just the direct index “sleeve”. To use the jargon of the industry, we usually manage unified managed accounts (UMAs) with direct index cores rather than standalone direct index separately managed accounts (SMAs). {See A Guide to SMAs and UMAs and How to Implement Direct Indexes}. Because we’re managing the whole portfolio, we are able to take responsibility for implementing cash withdrawals, asset class rebalancing, wash sale prevention and the like. As for investing cash, you don’t even need to tell us – we analyze every portfolio daily, and we’ll see if there’s extra cash. Managing the whole portfolio has other advantages, as well: risk and tax are both properties of portfolios, not sleeves; by managing the whole portfolio, we are in a better position to manage portfolio-level drift and taxes. 

Second, we have an advisor customization portal that lets client-facing advisors record customization and tax management options for each account. This includes product preferences (like using a direct index instead of an ETF), ESG customization, tax-sensitive transition requests, cash withdrawal requests, etc. 

Our goal is to free advisors to provide all of their clients with high levels of customization and optimized tax-management, while spending zero time on day-to-day portfolio review, rebalancing and trading. This frees up client-facing advisors to spend their time where it adds the most value – with clients and prospects. Learn more about SAM's direct index models and offerings here.

To learn more about whether SAM can help your firm grow, contact us.

SAM and direct indexes: SAM offers both direct index separately managed accounts (SMAs) and unified managed accounts (UMAs) with direct index cores. With UMAs, the client wealth advisory firm retains control of asset allocation and product choice — including the option to subscribe to third-party asset allocation models.