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Envestnet Inc., headquartered in Berwyn, Pa., has launched direct indexing for unified managed accounts in Canada.

The new model-traded direct-indexing offering, through Envestnet’s asset management subsidiary QRG Capital Management Inc., is the first of its kind in Canada, a release said on Monday.

“This is the first time in the Canadian market that direct indexing has been integrated into a unified managed account structure, giving advisors a powerful tool to offer true portfolio personalization at scale,” said Michael Featherman, head of investment consulting and distribution with Envestnet, in the release. “We believe this innovation will redefine the way Canadian investors access tailored wealth management solutions, bringing them greater control, efficiency and flexibility.”

Direct indexing allows investors to track an index by owning the underlying securities in a managed account rather than through a mutual fund or ETF. Owning the securities directly allows for tax-loss harvesting or the removal of certain companies from an index.

Several U.S. financial firms offer direct indexing, including Fidelity, Vanguard and Charles Schwab.

In its release, Envestnet said that in the U.S., direct indexing is the fastest-growing segment in managed accounts, with assets expected to grow at a 12.3% compound annual growth rate from 2022 to 2026, outpacing mutual funds and ETFs, according to Cerulli Associates. And six in 10 U.S. advisors surveyed by Cerulli said they’re considering direct indexing as an alternative to mutual funds and ETFs.

“We anticipate a similar trajectory in the Canadian market as investor expectations evolve, and demand for personalized, tax-efficient solutions like direct indexing continues to rise,” Envestnet’s release said.

With Envestnet, CG Wealth Management is “using direct indexing and tax optimization strategies with a few of our advisors and their higher-net-worth clients to expand the value proposition we can offer,” said Tim Evans, chief operating officer (Canada) with CG Wealth Management, in an email.

Historically, technology constraints and trading costs limited the number of firms that could offer a direct indexing service, Evans said.

“Our expectation is that demand for this type of service will grow as Canadian advisors increasingly recognize the benefits it can provide their clients,” he wrote. “Access to new, cutting-edge approaches such as direct indexing is one of the reasons we chose to work with Envestnet.”

Canaccord Genuity Group Inc. partnered with Envestnet in 2020 for its unified managed account platform, as did Richardson Wealth in 2021.

Envestnet’s latest launch is part of its broader initiative to expand its platform capabilities and enhance the advisor and client experiences in Canada, the firm’s release said.