Direct indexing spent years as a boutique idea, a way for the wealthiest clients to hold an index as individual securities and harvest the tax losses along the way. The filings suggest that era is ending. References to direct indexing in adviser brochures rose more than 10-fold between 2021 and 2026, from a fraction of a percent to about two percent of firms. That rise holds even within the same set of firms tracked across both years, so it reflects genuine adoption rather than a changing survey universe.
Two percent still sounds small. But a roughly 10-fold rise over five years is not a slow drift, it is a sharp climb. And the number underneath it matters more.
The latest reading is sharply higher
Direct-indexing references roughly tripled between 2021 and 2024, then rose sharply again by 2026. To be sure the jump was real and not an effect of a larger, later dataset, we tracked the roughly 8,500 firms present in both 2021 and 2026: within that fixed set, the share referencing direct indexing climbed from 0.2 percent to 2.0 percent, a 13-fold rise. Newer firms outside that set reference it at almost exactly the same rate, so the trend is not an artifact of who happens to be in the data. This is a capability moving from the margins into the working vocabulary of advisers.
Tax management is the bigger, quieter story
Direct indexing gets the attention, but tax-loss harvesting is referenced by more than double the firms, and it has been climbing steadily for years. The two are close cousins in practice, so the larger, established base of tax-management language is a useful backdrop for reading where direct indexing sits today.
Customization language is already everywhere
The number that reframes the rest is customization. Around a quarter of advisers reference accommodating custom client restrictions, roughly 13 times the share referencing direct indexing, and both come straight from firms' own filings rather than a survey. Custom restrictions arise from many things, concentrated stock, ESG or religious screens, legal and tax constraints, legacy holdings, so this is not itself proof of direct-indexing demand. But it shows that the underlying need, tailoring a portfolio to a client's specific constraints, is something advisers already encounter constantly. Direct indexing is one modern way to meet that need at scale, and it appears in only a fraction of filings. The gap between how routine customization language is and how rare the tooling reference remains is the addressable use case.
| Signal | 2021 | 2022 | 2023 | 2024 | 2026 |
|---|---|---|---|---|---|
| Direct indexing | 0.2% | 0.3% | 0.4% | 0.7% | 2.1% |
| Tax-loss harvesting | 4.2% | 4.3% | 4.4% | 4.4% | 5.5% |
| Personalized indexing | 0.0% | 0.0% | 0.0% | 0.1% | 0.3% |
| Custom indexing | 0.2% | 0.2% | 0.1% | 0.3% | 0.5% |
| Long/short extension | 0.2% | 0.2% | 0.2% | 0.2% | 0.4% |
| Custom restrictions | 26.7% | 27.3% | 28.2% | 29.2% | 27.3% |
On validation. We audited a random sample of flagged firms by hand, reading every triggering sentence against the underlying brochure and counting false positives rather than filtering them out. Roughly three in four sampled firms were confirmed as genuine references, with no false positives from negated statements. Because some flagged language is a false positive while some genuine use goes unnamed, the measure carries error in both directions and is not a floor. The residual noise is broadly consistent across years, so it affects the levels more than the direction.
Sources and method
Source. Figures are drawn from public SEC Form ADV Part 2 brochure filings across the registered adviser universe. The 2021 to 2024 readings share a consistent scoring basis of roughly 11,000 to 12,000 firms each year; the 2026 reading is a separate, later sweep of about 15,900 firms. Because each figure is a rate within its own year, the values are comparable across years, and we confirmed the 2021-to-2026 rise on a matched cohort of the roughly 8,500 firms present in both periods, which showed the same trend and rules out the larger 2026 universe as its cause. The absolute counts behind that cohort are small (13 firms referencing direct indexing in 2021, 172 in 2026), so the multiple is robust but rests on a low-frequency signal. All three periods were scored with the same detection pipeline.
What a signal means. A signal means a firm referenced the capability in its public brochure. It is not verification of active use, and firms are not required to use these exact terms. The measure is therefore an incomplete text-based proxy for adoption, with error in both directions: firms may use a capability without naming it in these words, while some flagged language does not reflect active use. Exact percentages carry a margin and are best read to one significant figure; the trends and the relative gaps between signals are the robust part.
Not advice. For market and distribution-intelligence purposes for professionals in the asset- and wealth-management industry. Not investment, financial, tax or legal advice, and not a recommendation or assessment of any firm. SignalPM is independent and not affiliated with or endorsed by the SEC. Figures should be independently confirmed before any business decision.