Fidelity® Expands Direct Indexing Product Lineup With Rollout of Fidelity Institutional Custom SMAs

Fidelity® Expands Direct Indexing Product Lineup With Rollout of Fidelity Institutional Custom SMAs

Growing Custom SMA lineup builds on Fidelity’s commitment to delivering better outcomes and providing the best end-to-end experience to meet client needs for today and in the future.

Fidelity Investments® announced the expansion of its direct indexing capabilities with the launch of the Fidelity Institutional Custom Separately Managed Account (SMA) offering for select wealth management firms and institutions.

With Fidelity Institutional Custom SMAs, Fidelity can build and manage equity portfolios customized to investors’ needs and preferences. The lineup currently includes 10 tax managed equity strategies across domestic, international, global and sustainable equity exposures. As the Custom SMA offering continues to expand, it will target a range of different market exposures and can be tailored by applying tax management, excluding certain securities, sectors or industries and applying a sustainable overlay for security selection to incorporate personal values.

The Custom SMA lineup is rolling out to select Fidelity Institutional clearing and custody clients in the coming months, with anticipated broad availability to RIA, Broker Dealer and Family Office clients in 2023.

“Financial advisors are increasingly looking to help improve client outcomes and deliver personalized investment solutions, and we see custom SMAs as an opportunity to address these needs with scalable yet highly customizable solutions,” said Gary Gallagher, head of Fidelity Institutional Wealth Management & Advisory Solutions. “What sets our offering apart from others is our ability to leverage the expertise, technology, and resources of both our quantitative and active fundamental investment teams to develop a wide range of strategies. We also are focused on streamlining the digital experience with enhanced brokerage integrations to help improve the friction many advisors face when managing direct indexing in their business today.

Fidelity is focused on delivering a simple, intuitive digital experience that gives advisors the ability to better serve their clients. The interface will provide capabilities for advisors to customize, implement, and monitor their clients’ Custom SMAs, including the ability to analyze scenarios dynamically.

“Investors’ needs and preferences are evolving while at the same time data is proliferating, and the technology required to harness it and deliver products that meet our clients’ expectations is growing at a rapid pace,” said Neil Constable, head of Fidelity’s Quantitative Research and Investments (QRI) division. “Fidelity sees quantitative and systematic investing, which uses technology, data science, and empirical research, as a game changer in the asset management space to help improve investor outcomes, achieve personalization at scale, and create solutions that are cost-effective for investors.”

Fidelity continues to invest heavily in quantitative resources to help harness the power of modern data and technology and combine it with the firm’s long standing fundamental investment philosophy anchored on research. Led by Neil Constable, Fidelitys QRI team is an integrated division of nearly 300 quants, data-scientists and technologists within Asset Management.

Fidelity’s Tools and Solutions for Advisors to Help Meet Evolving Client Needs
Advisors are seeking solutions that can help them go beyond managing money so they can spend more meaningful time helping clients build holistic financial plans. The Institutional Custom SMAs are an extension of Fidelity’s broader portfolio construction capabilities for advisors, including Fidelity Model PortfoliosFidelity Advisor SMAsFidelity Portfolio Quick Check®, and a range of thought leadership.

Direct indexing is in the news and top of mind for many advisors. Many see direct indexing as an investment strategy that, by directly owning all or a subset of the individual securities of an index, allows investors to tailor their accounts to their tax situation and individual preferences at the security level. Fidelity delivers direct indexing capabilities to advisors through Fidelity Institutional Custom SMAs, but the offering will go beyond index-oriented strategies with plans for active and blended strategies as well. Fidelity recently released a new paper, titled “The Unique Value of Custom SMAs in Wealth Management: Direct Indexing and Beyond,” which aims to help advisors understand the opportunity that the rise of direct indexing and custom SMAs presents for their practices.

In March 2022, Fidelity completed an acquisition with Geode Capital Management which included a $3 billion customized SMA business for family offices, now known as Fidelity Institutional Custom SMAs. Geode specializes primarily in index investment management and currently serves as the subadvisor to $790 billion in Fidelity equity index fund assets. This acquisition, as well as Fidelity’s QRI team, enabled Fidelity to offer highly customized, tax managed portfolios through SMAs for Fidelity Institutional clients.



Joel Bruckenstein
Joel Bruckenstein
Joel P. Bruckenstein, CFP®, is Publisher of the T3 Tech Hub (formerly the T3 newsletter) and the producer of the Technology Tools for Today (T3) Advisor Conference, the only annual technology conference for independent advisors, as well as the Technology Tools for Today (T3) Enterprise Conference. He also hosts other technology summits in partnership with thought leaders in the financial services industry (e.g., Brian Hamburger of MarketCounsel) and his own by-invitation-only fintech summit every summer. In 2020, Bruckenstein will produce for the first time a new one-day intensive called T3 Cyber University. Bruckenstein is an internationally acclaimed expert on applied technology as it relates to the financial service industry. He is the co-author of three books: Virtual Office Tools for a High Margin Practice, Tools and Techniques of Practice Management, and Technology Tools for Today’s High Margin Practice. Bruckenstein’s monthly technology columns appeared in Financial Advisor magazine and Financial Planning magazine for many years. In addition, he works in tandem with industry influential Bob Veres, publisher of Inside Information, to produce an annual technology survey for the financial planning community. Bruckenstein accepted the fifth annual Leadership Award bestowed by Bob Veres' Insider's Forum, a conference that brings together the leading figures of the financial planning profession during a main stage presentation at the Insider's Forum held September 6-8, 2017 in Nashville, TN. Bruckenstein has for more than twenty years advised financial service firms of all sizes on improving their technologies, processes and workflows. For more information about Joel Bruckenstein and the services his firm offers, please visit www.JoelBruckenstein.com.

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