Direct indexing is moving from niche tax strategy to mainstream portfolio tool for wealthier clients, and it appears to be paying off for advisors who commit to it, according to new research from Northern Trust Asset Management.
In a pair of studies conducted in 2024 and 2025, Northern Trust surveyed 300 advisors and then a narrower group of 87 “superusers” who have fully integrated direct indexing across their books. Those superusers – who come from RIAs, independent broker-dealers, wirehouses, and bank and trust firms – reported measurable gains in client retention, wallet share, and referrals after adopting the strategy.
Among advisors identified as superusers, 88% said direct indexing had strengthened client retention, while 87% said it helped them capture a larger share of wallet from existing clients. Most did not roll it out all at once. The research found that three-quarters of advisors started with a small group of clients, then expanded as tax results and client feedback came in.
The report also suggests direct indexing is changing the nature of client conversations. Ninety-three percent of superusers in Northern Trust's study said it enables more meaningful planning discussions, pushing meetings beyond benchmark-driven performance reviews toward more sophisticated topics like taxes, concentrated stock positions, charitable giving, and wealth transfer.
Suzanne Casey, co-head of the wealth client group at Northern Trust Asset Management, said that direct indexing can “empower financial advisors to deliver personalized, transparent, and effective portfolio management” and is “becoming the default expectation among wealthier clients.”
While the marketing around direct indexing has often centered on tax-loss harvesting, the advisors in the superuser cohort cited a broader mix of benefits. Respondents highlighted ongoing tax-loss harvesting and reduced capital gains taxes alongside portfolio customization, better risk management, more transparency, and tools to manage appreciated or concentrated positions. Many also pointed to values-based screening and the ability to tailor portfolios around specific client goals.
The research frames direct indexing adoption as a four-step journey: education, assessment, trial and integration. In earlier 2024 survey work, a large share of advisors were still on the fence, going through the education and exploratory assessment stages. Another survey by global index provider FTSE Russell that year found 79% of advisor respondents from independent RIAs, broker-dealers, and asset managers still were not using direct indexing.
But by 2025, Northern Trust found 41% of superusers would have integrated direct indexing more aggressively if they were starting again, and many would have leaned harder on education resources for both clients and internal teams.
Despite some initial concerns about complexity and operational lift, superusers described the actual rollout as manageable. On average, they rated integration difficulty at 2.4 on a five-point scale, and 45% said they spend between zero and five hours per month on direct indexing once it is in place. Several advisors interviewed for the report said the strategy quickly became part of their standard workflow rather than a boutique overlay.
To be clear, the strategy is not for everyone. The research points to a typical entry point of roughly $250,000 or more in investable assets – putting them roughly in the mass affluent band of the net worth spectrum – with taxable accounts and a desire for personalization as key markers. Advisors reported the strongest traction among high earners, business owners, and clients who care about either tax efficiency, portfolio customization, values alignment, or some mix of the three.
“Direct indexing is no longer just a tax tool – it’s a transformational platform for advisors and clients alike,” said Ken Lassner, direct indexing lead product strategist at Northern Trust Asset Management. He said the research “shows how direct indexing is driving real business results for financial advisors and elevating the client experience.”
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