Blog Post Banner Image
02 June 2020

Powerful Rebalancing Technology Fuels New Era of Advisory Services

By Steve Leivent

It’s the perfect storm…but in a good way. A combination of three powerful forces—zero commission trading, direct indexing and advanced rebalancing technology—is unlocking a slew of advisory opportunities.

When free trading took the advisory world by storm toward the end of 2019, the impact was immediate and widespread. Soon after this seminal shift, the anticipated rise of another outcome began to take shape: direct indexing. Our new whitepaper, The Rise of Direct Indexing in a Zero Commission World, examines the realities of a transformed stock and ETF trading landscape and spells out what it can mean for you and your clients.

In the past, trading costs compelled advisors to default to a fund structure to track a particular index. With the ability to replicate an index by directly owning the underlying securities instead of an ETF or mutual fund, direct indexing becomes a powerful new tool. No longer needing to rely on expensive fund structures to gain diversification, advisors can create their own, personalized solutions and baskets of securities that have the potential to dramatically increase risk-adjusted performance.

However, as the whitepaper lays out, direct investing does not happen in a vacuum. The underlying key to realizing its benefits for your clients is powerful rebalancing and trading technology. The ability to rebalance and generate trades at scale is critical to the efficient execution of direct indexing strategies – particularly in a period of market volatility that creates tax-loss opportunities.

A robust solution that can rebalance at scale is client-centric – leveraging rules capabilities and settings to account for separate holdings and other factors, particularly in times of market volatility. A prime example of this is the Black Diamond Rebalancer, designed with extensive input from advisors. You can quickly determine and compose the appropriate mix of holdings and weightings to replicate the performance of specific indices or meet other investment objectives.

The Black Diamond Rebalancer also includes functionality for tax-efficient rebalancing, including threshold alerts for tax-loss harvesting opportunities. Proactive monitoring helps keep track of daily cash requirements and automatically alerts you to portfolio drift. Once strategies are put into effect, straight-through trade processing enables you to track the progress of trades across their full life cycle.

In today’s new zero-commission world, you can create and implement your own active or passive direct indexing strategies. For the full picture, download the whitepaper today.