Direct Indexing

Dial in On Investment Goals

Direct indexing purchases a selection of the stocks within an index with the goal of replicating the index’s risk and performance. This differs from an index exchange-traded fund (ETF), where an investor buys a single investment tracking the index.

Instead of purchasing every stock in the index, a smaller number of stocks are selected. This can allow the investor to track the index more closely and take advantage of lower account minimums and transaction costs.

Impact Partnership Wealth offers two ways to invest with Direct Indexing.

IPW Direct

The IPW Direct Model offering helps advisors build a customized direct index model that allows them to personalize the offering built with their clients in mind.

After being provided a benchmark to track, IPW provides model signals to assist advisors with creating a customized direct index model. IPW’s advisor-managed model process allows advisors to add their desired fixed income and international stock exposure, or can allocate clients to the model based on IPW Direct signals in addition to fixed income and/or international stock models.

Signals are provided when tracking error begins to rise, allowing for reallocation and rebalancing of the model.

IPW Direct Flex

Advisors can specify a benchmark to follow, made up of one or a combination of indexes available and/or certain models¹ on the IPW platform. IPW will optimize the account to a set of holdings where the weightings generate the lowest tracking error to the benchmark given the client’s annual capital gains budget. Re-optimization is done only when tracking errors rise and subsequent trades can return the account to acceptable tracking error levels and the capital gains budget supports a reallocation.

If you need broad-based and passive core options, seek lower-cost options, or have clients with highly appreciated, concentrated positions or who are looking to transition a diversified portfolio to an entirely new model portfolio, this option can be a powerful tool.

IPW Direct Flex also offers an additional tax-loss harvesting option. IPW constantly monitors for potential harvesting opportunities, realizing losses and redeploying cash to allocations that reduce tracking error. By reducing net gain or loss for clients IPW Direct Flex can provide additional room to operate within a net annual capital gains budget.

Models available to target include the following: Disciplined Edge, Diversified Income, Institutional Alpha, Institutional ETF, Pure Edge, Strategic Index, Tactical Edge Beta (35, 65, 85), BlackRock Target Allocation ETF, Fidelity Target Allocation, and advisor managed models.