Direct indexing now mainstream but there are still barriers to widespread adoption, FTSE Russell survey finds

Direct indexing is enjoying greater adoption in the wealth management industry, according to FTSE Russell’s latest survey, which also flags the barriers in the path of the growing investment strategy.

Based on the responses of 400 U.S.-based financial advisors, the study found that 83% of respondents are either currently using or plan to use direct indexing, up from 76% in last year’s survey. Some 83% of advisors in this year’s survey also said that direct indexing is especially beneficial for high net worth clients, agreeing that it had helped them grow/strengthen their high net worth client business.

Tax-loss harvesting is the main benefit of direct indexing, according to two thirds (66%) of respondents to the third annual survey, which has been launched to coincide with the Future Proof Festiva kicking off in Huntington Beach, Calif. Monday.

“As advisors’ familiarity with direct indexing increases, we are seeing a corresponding rise in adoption across virtually all measures over the last year,” Adam Gebler, head of wealth, Americas, at FTSE Russell, said in a statement. “Future growth depends less on the benefits of direct indexing and more on solving educational and technology challenges.”

Certainly, there are barriers to adoption. While the research found that lack of client demand declined as a perceived challenge to 35% in 2026 from 45% in 2025, the challenge of educating clients was cited by 33% of advisors in 2026, down slightly from 34% last year. Advisors’ own understanding and knowledge of direct indexing was highlighted as a challenge by 31% of respondents, up from 27% in 2025.

Costs were also identified as a hurdle by 29% of this year’s survey respondents, up from 19% last year. Tech is another headache – more than half (59%) of respondents said that integrating direct indexing with their tech stack is a challenge, up from 52% last year. Set against this backdrop, independent broker dealers face the greatest integration challenge, with 65% reporting difficulties. Even 51% of wirehouse and traditional channel advisors, a sector that can harness scale and a centralized infrastructure, said they find integration challenging.

“Advisors are looking for practical support that can help them understand the investment case, select appropriate benchmarks and translate the benefits of personalisation and tax management into client conversations,” Gebler, who is attending Future Proof, added.

Direct indexing has certainly been enjoying growth in recent years – assets held under the strategy accounted for $1.2 trillion at the end of 2025, according to Cerulli Associates, which expects direct indexing to grow faster than ETFs, traditional separate accounts, and mutual funds over the next five years.