Financial innovation is intersecting with technology in the investment management space: Strive Asset Management’s latest announcement to bring its Direct Indexing, powered by Vestmark VAST, to Fidelity and Charles Schwab platforms could recalibrate how investors approach portfolio management.
For decades, ETFs and mutual funds dominated passive investing. They promised simplicity and exposure to market indices but with limits – specifically, the inability to fully customize holdings or optimize for taxes. Direct Indexing upends this paradigm by allowing investors to own individual stocks mirroring an index. At the core of Strive’s approach lies a potent technological engine: Vestmark VAST, which uses sophisticated algorithms to deliver daily tax-loss harvesting and tax-efficient transitions from existing equity portfolios, according to an announcement issued Tuesday.
Optimizing Taxes in Real-Time
The power of technology in this new offering cannot be overstated. Tax-loss harvesting – selling securities at a loss to offset taxable gains – has traditionally been a manual and periodic process, often done at year-end. Vestmark’s VAST technology automates this into a daily routine, analyzing portfolios for potential loss-harvesting opportunities in real time. This ensures that investors capture every possible tax advantage, reducing their taxable income and reinvesting the savings into their portfolios.
“97% of U.S. Large Cap companies had drawdowns of 10% or more at some point during the 2023 calendar year,” noted Matt Cole, CEO of Strive. “In 2022, the number was 100%. To be able to harvest those losses on a daily basis while also receiving the pro-shareholder governance that Strive provides is something investors cannot get anywhere else.”
Empowering Advisors and Investors
Strive’s new venture could expand access to bespoke portfolio management. Historically, direct indexing was available only to ultra-high-net-worth individuals due to its complexity. By leveraging Vestmark’s platform, which supports over $1.5 trillion in assets across 5.5 million accounts, Strive ensures scalability and accessibility. Financial advisors can now create highly tailored portfolios without the traditional administrative burden, aligning investments with individual client goals and maximizing after-tax returns.
Karl Roessner, CEO of Vestmark, said, “Every day, we empower financial advisors to create highly personalized, tax-optimized portfolios at scale, helping to ensure each client’s unique financial goals are met with precision and efficiency. At Vestmark, we deliver compelling solutions that help to enhance advisor capabilities and client outcomes.”
Beyond ESG and DEI: The Shareholder-First Approach
Co-founded by former presidential candidate Vivek Ramaswamy, Strive’s unique corporate ethos has made headlines. Unlike many firms that incorporate Environmental, Social, and Governance (ESG) or Diversity, Equity, and Inclusion (DEI) guidelines, Strive says it zeroes in on shareholder value maximization. According to Strive, the firm’s in-house corporate governance team ensures that investors’ proxy votes advocate for pro-shareholder policies – potentially driving stronger financial outcomes.
