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Personalization & Customization Through Index-Based Investing

Morningstar Weighs in on Direct Indexing

What exactly is “direct indexing” and how are financial advisors and investors starting to use these strategies for their client portfolios? In what ways are new generations of investors looking for more personalization and customization? What are some of the key ESG risks facing investors today in an increasingly volatile and interconnected world?

Representatives from Morningstar Investment Management LLC, Morningstar Indexes and Morningstar Sustainalytics recently addressed these and other related questions in a special webinar – 3 Ways to Help Solve Unique Client Challenges with Direct Indexing. Insights from this webinar for the financial advisor community included:

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Cindy Galiano – Head of Product, Morningstar Investment Management LLC

“Direct indexing isn’t really a new idea although it is a hot topic lately. Direct indexing allows advisors to get really granular in how they personalize portfolios for their clients, but at a scale they haven’t been able to achieve in the past. When you offer an experience that gives your client a way to more closely connect their investment portfolio with their values, this can create a powerful bond for you with that client."

 

 

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Pete Dietrich – Head of Wealth, Morningstar Indexes

“Technology advances, ESG awareness, fractional shares and the ability to actively manage tax exposure have all led to growing interest in direct indexing approaches. The trend toward personalized investing is here to stay. We personalize so many things these days, it is natural to think about personalizing our investment portfolios. The beauty of personalization is that investors are able to tailor their holdings to reflect their own values and preferences.”

 

 

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Shila Wattamwar – Global Head of Retail & Wealth ESG Strategy & Partnerships, Morningstar Sustainalytics

“Direct indexing-like strategies, traditionally used by institutional investors, are now more broadly accessible to the retail audience. When an investor is looking to personalize his or her holdings to reflect specific values, they will look for a greater level of customization with their portfolio. Direct indexing helps facilitate this. A more personalized approach allows advisors to connect more closely with clients and helps reinforce the advisor-client relationship.”


Access the full webinar replay to hear more from our speakers.

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Sustainalytics is an environmental, social, and governance and corporate governance research, ratings, and analysis firm. Morningstar acquired Sustainalytics in 2020. Sustainalytics provides ESG scores on companies, which are evaluated within global industry peer groups, and tracks and categorizes ESG-related controversial incidents on companies. Morningstar uses Sustainalytics’ company level ESG analytics to calculate ratings for managed products and indexes using Morningstar’s portfolio holdings database. 

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