Episode Summary

Tom O’Shea, a director at Cerulli Associates, explains why taxes and ESG are creating a surge of interest in direct indexing, a separately managed account product that has been around for 20 years. His research firm predicts a 12.4% growth in direct indexing assets, compared with 11.3% for exchange-traded funds and 3.3% for mutual funds. InvestmentNews hosts Jeff Benjamin and Bruce Kelly discuss a report from two academics that suggests $36 million of the $590 million that RIAs accepted in the first round of PPP loans last year went to firms that abused the program.

Episode Notes

Interview with Tom O'Shea – 0:30-19:15

• Direct Indexing 101.
• Factors driving the growth.
• Direct indexing as a way to get factor exposure or tilt.
• Who are the players and what's the special sauce?
• How big companies might change the game.
• Growth projections for direct indexing.
• Cost of direct indexing.

PPP loans aftermath – 19:20-31:15 

• How many RIA firms took PPP loans, and for how much?
• The case against RIA firms using the PPP program.
• The degree of PPP fraud in the industry.

Related article: Direct indexing indexing emerges as must-have tool for tax management, ESG investing

Related article: Advisers reportedly gouged PPP loans by $36 million

Guest bio: Tom O’Shea, director of managed accounts at Cerulli Associates, has more than 20 years of experience in the financial services industry. Prior to joining Cerulli, Tom was an investment product manager at Fidelity’s Global Asset Allocation Division, where he played a leadership role in the ongoing development of Fidelity Personalized Portfolios, Fidelity’s Unified Managed Account (UMA) for retail customers. He also led the investment managers in creating the Breckenridge Municipal Portfolio, Fidelity’s first separate account for consumers managed by a third party. Before working on the retail side of Fidelity, Tom built and led the team that developed Fidelity’s Separate Account Network for registered investment advisors, and his group partnered with a third-party wrap sponsor to create Managed Account Resources, a UMA platform for RIAs.