Direct indexing: The next frontier in personalised financial advice

In this context, direct indexing is emerging as the most powerful way for advisers to deliver hyper-personalised investment solutions at scale.

For decades, advisers have had to choose between personalisation and efficiency. Pooled investment vehicles like exchange-traded funds (ETF) and managed funds revolutionised access and affordability, but they have always come with limitations: lack of visibility into underlying holdings, limited ability to customise exposures, and no control over timing or tax outcomes. Direct indexing changes that.

Thanks to advancements in technology, accessibility and platform integration, direct indexing is no longer reserved for institutional investors or ultra-high-net-worth clients. It’s now a practical, scalable solution that forward-thinking advisers can adopt today to stay ahead of client expectations – and ahead of the competition.

Personal advice delivered through the portfolio

The advice process is fundamentally built on knowing the client, yet when it comes to portfolio implementation, advisers have often been forced to compromise, using pre-built managed accounts or pooled vehicles that only approximate what the client truly wants or needs. Direct indexing removes that compromise, enabling advisers to align each portfolio with the unique objectives of the individual sitting in front of them.

Direct indexing enables advisers to fully align portfolio construction with the goals, values and risk preferences of each client. Do you want to build an ASX 200-aligned portfolio but exclude fossil fuels? Do you want to exclude specific stocks that you already hold? Do you want to remove specific industries or sectors? With direct indexing, these decisions can be made and executed client by client – without abandoning diversification or layering on excessive cost.

This is more than a technological upgrade – it’s a structural shift in how portfolios can reflect personal advice.

Transparency builds trust

In a direct indexing portfolio, clients own the underlying securities directly. This offers a level of transparency – and control – that’s simply not possible with managed funds or ETFs. Every stock, every weight, every trade is visible and attributable.

This transparency fosters trust. It opens the door to more meaningful conversations around environmental, social and governance (ESG) preferences, sector views and performance attribution. It also empowers advisers to provide a more educational and collaborative experience. Rather than having to justify why a pooled vehicle includes a controversial holding, advisers can proactively construct portfolios that align with their client’s world-view.

In an age where authenticity matters more than ever, that alignment can be a major driver of client loyalty.

Technology makes it scalable

Historically, custom portfolios were associated with high cost, high effort and high risk. But direct indexing technology has turned that equation on its head.

Platforms like Briefcase fully automate portfolio construction, rebalancing, daily portfolio monitoring and reporting – freeing advisers from the operational burden of running hundreds of bespoke portfolios. Trades are executed efficiently, compliance checks are automated and reporting keeps everything transparent.

The result? Advisers can deliver truly personalised portfolios without hiring an in-house investment team or taking on unnecessary compliance complexity. And with more time freed up, they can focus on what matters most: building deep, long-term relationships with their clients.

Now live on major platforms

The barriers to entry for direct indexing are rapidly disappearing. The capability is now available through a range of major platforms, including Netwealth, BT Panorama, Bell Direct and nabtrade – allowing advisers to access the approach without changing their existing platform, custodian, or investment philosophy.

With integrations that enable automated portfolio data feeds into third-party systems, reporting and monitoring have also become far more efficient. This makes it possible to deliver direct indexing seamlessly alongside existing advice services, and to scale it across diverse client segments – from self-managed super funds and high-net-worth individuals to younger investors with ESG preferences.

Customisation drives retention

In today’s market, clients are not just seeking performance, they are looking for alignment. They want portfolios that reflect their values, respond to their life changes, and feel like they’ve been built for them.

Direct indexing enables advisers to meet those expectations. And in doing so, it helps increase client engagement, satisfaction and retention especially among younger, values-driven investors who may not resonate with off-the-shelf products.

As portfolio personalisation becomes the new standard, advisers who adopt direct indexing early will be in the best position to meet (and exceed) those rising expectations. A deep focus on customer engagement – and retention – is one of the ways the new wave of advisers will differentiate themselves from their competition.

The financial adviser is the hero

Perhaps the most profound shift direct indexing offers is the opportunity to evolve the adviser’s role. Rather than acting as distributors of investment products built by others, advisers can now step into the role of portfolio architect – designing and implementing solutions tailored to each client’s needs.

This shift not only enhances the adviser’s value proposition but also opens the door to new service offerings and revenue models. It deepens the advice relationship and reinforces the adviser’s role as a trusted, ongoing partner … not just a facilitator of third-party products.

Following global trends, leading local change

In the US, direct indexing has already reached critical mass. The past five years have seen a wave of innovation, acquisitions and product launches culminating in major firms like Vanguard, BlackRock and Schwab heavily investing in the space.

Australia is now poised to follow suit. With regulatory tailwinds, platform readiness and growing demand for personal advice, the opportunity is ripe for local advisers and firms to lead this transformation.

Direct indexing represents more than a new investment strategy. It’s a new chapter in the evolution of adviser-led portfolio design, one where technology empowers advisers to deliver hyper-personalised outcomes, without sacrificing scale or compliance.

As the advice profession continues to move away from product-centric models and towards client-centric services, direct indexing is the bridge that connects both worlds. For advisers aiming to future-proof their business, deepen client relationships and stand out in a crowded market, this is a frontier well worth exploring.

Josh Persky, founder and CEO of Briefcase