I'm curious what led to the lack of demand for this—was it the friction involved in moving brokerage accounts, or do ETFs already meet the needs of most retail investors? A post-mortem on the limited traction would be quite insightful.
As I understand it, this product involved using fractional shares to try to adhere to an index, while using tax loss harvesting to optimize for tax.
Fractional shares cannot be transferred between brokerages and are generally sold when transferring brokerages. If you owned on average, half a share of the largest 250 US companies, you'd may need to sell about $30,000 in shares, which could result in an unexpected tax bill.
There are large brokerages and companies offering similar direct indexing products, generally at a higher cost. However, I expect those products are less likely to be shut down.
The problem was easy/trivial competition from larger brokerage firms. The core IP was all about tax optimization. The same customers who would employee direct indexing already have dedicated accounting services for exactly that purpose and the additional brokerage fees are either sunk costs or de minimis.
To use an analogy, the folks who are hedge fund customers don't care about the lack of liquidity or higher management fees. You can't capture that market on margin, volume, or any kind of flow ancillaries.
They had cute names for the indexes ("Founder Mode")... but do those actually make me better returns than an ETF? Probably not.
this[0] also scared me away
Nobody with any real money and smarts is going to do that.
Now if this was somehow a crypto play, I’m sure they’d be rolling in it.
> If you are technical, we are open sourcing our optimization engine, Oracle, which does our daily Tax Loss Harvesting and rebalancing. You may be able to use this to set up your own trading bot on Alpaca. You will need to contact Alpaca support to request an ACATS of your current assets held at Double.
> Note that ETF Holding data, corporate action data, and possibly factor model data would be required to reproduce Double’s Direct Index strategies. Unfortunately this data is not generally free and would require a fair bit of work to get Oracle working.
It would be interesting to have an open source direct indexing system with plugins for different brokerages. A CLI tool that provides recommended trades and an option to accept or cancel would be perfect.