Charles Schwab updates direct indexing technology for RIAs

The technology is increasingly seen as table stakes for firms supporting financial advisors.

Charles Schwab has overhauled Personalized Indexing, its direct indexing product for registered investment advisors.

RIAs can now use Schwab’s Managed Account Access platform to digitally open and fund new direct indexing accounts, which reduces errors and speeds up processing, Schwab said. Personalized Indexing, which Schwab first introduced in 2022, requires an account minimum of $100,000.

Schwab also has a new account-level digital dashboard that RIAs can use to view the performance of direct indexing accounts, such as total realized gains and losses generated driven by tax-loss harvesting algorithms.

For advisors looking to further personalize client portfolios, Schwab increased the number of individual stocks, industries and subindustries that advisors can exclude from custom indexes. The maximum number of exclusions an advisor can make is guided by a tracking error tool that shows how a Personalized Indexing portfolio expects to perform relative to its reference index.

“We know that independent advisors are increasingly looking for ways to personalize the investing experience for their clients,” Divya Krishnan, director of Schwab product management, said in a statement. “We are excited to bring advisors a more efficient, modern experience for enrolling their clients in Schwab Personalized Indexing, alongside powerful new capabilities for tailoring portfolios to personal client preferences or situations.”

After the industrywide rush to acquire direct indexing capabilities in 2021, the technology is increasingly seen as table stakes for firms supporting financial advisors. BNY Mellon launched a new direct indexing product Tuesday for advisors called Precision Direct Indexing as part of Pershing X’s new advisor technology platform, Wove.

Also this week, Archer, which provides technology to investment management firms, partnered with Brooklyn Investment Group, a New York City-based RIA, to launch a new direct indexing product that brings in artificial intelligence-powered natural language processing to assist in the construction of separately managed accounts.

“Our shared vision is that tech-powered SMAs will transform the asset management industry, much like ETFs transformed an industry dominated by mutual funds over the past three decades,” Erkko Etula, Brooklyn’s CEO, said in a statement. “As AI advances, so will our platform.”