In an interview with CityWire, Patrick O’Shaughnessy, CEO of O’Shaughnessy Asset Management, discussed the company’s software-centric investing service, Canvas. The service is the first custom indexing platform, which allows advisors to create unique strategies in separate accounts for their clients. O’Shaughnessy maintains that custom indexing is the natural progression from direct indexing, because it combines quantitative research with the software, and empowers the advisor to implement custom strategies for each of their clients.
Customization at O’Shaughnessy isn’t required, but of the 750 accounts using the system, 80% have completely custom settings. The dimensions that clients care most about are taxes, the ability to put value into a portfolio, and risk and ESG. While only 15-20% of the company’s accounts use the ESG feature, O’Shaughnessy says that ability to screen for both the negative and positive is the most important feature for those clients.
At present, there’s a $250,000 minimum to open a Canvas account, though O’Shaughnessy sees that minimum falling over time as trading costs come down towards zero. And while some might see advisors being cut out of the equation, O’Shaughnessy stressed that they remain a vital component, saying “People want human advice.”
The obvious next step, “is the ability to customize and have access to great strategies in other asset classes,” O’Shaughnessy says. Beyond that, he sees Canvas powering apps built by advisors specifically for their clients, predicting that in 5-10 years advisors will have their own software. As investing becomes more and more digitized, Canvas could power a lot of that ecosystem.