Go Sleeveless or Go Home is a December 5, 2024 blog post by Gerard Michael, President of Smartleaf, that discusses two approaches to managing client portfolios. Selecting and compiling multiple strategies and accounts (which he refers to as "sleeves") or managing all strategies and accounts holistically ("sleeveless").
The term "Direct Indexing" has been adopted by the industry to mean portfolio overlay management that delivers optimized trading, tax-management and personalization. Most "Direct Index" strategies are US Equity Separately Managed Accounts (SMAs) that deliver large cap equity exposure with the ability to actively harvest losses when individual stocks decline in value, to delay trades that create a short-term capital gains until they become long term gains, manage around concentrated positions, and incorporate client preferences for keeping or excluding certain securities or sectors. They can also provide factor tilts, utilize custom stock portfolios and more recently be applied to 3rd party active equity strategies.
The article compares this sleeved approach for "Direct Indexing" and multiple siloed accounts or strategies to create the clients overall portfolio to having one solution that delivers trading, rebalancing and optimization across all holdings at once.
Smartleaf, and Smartleaf Asset Management (their turnkey sub-advised solution) is one of the first to provide portfolio management overlay at a household level. Think of it as creating an IPS for each client or household and applying that methodology across every possible trade, everyday, all of the time. Spoiler alert: it is not difficult to guess their opinion in the matter, but the post is a very good read. It considers not just efficiency in terms of the client outcome, but the impact of cost and complexity for the advisor and their firm.
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