As wealth management becomes increasingly personalized, custom indexing—once reserved for institutional and ultra-high-net-worth (UHNW) investors—is emerging as a transformative tool for financial advisors serving a broader range of clients. Roger Paradiso, Head of Custom Client Solutions at Franklin Templeton, has been leading the firm’s efforts to integrate advanced customization, tax optimization, and ESG preferences into scalable investment solutions.  

Paradiso shares his executive perspective on how advisors can leverage custom indexing to deliver performance, personalization, and deeper client engagement. 

CM: As someone who’s been deeply involved in portfolio innovation, how do you define custom indexing, and why is it becoming such a focal point in wealth management today? 

RP: At its core, a custom index is a tax-optimized portfolio that tracks a target index, blend of indexes, or multi-asset model and can be personalized around each client’s exposures, needs, or values. We’re seeing rapid growth in this space as advisors look to differentiate their value proposition through tax efficiency and personalization. Advances in technology and the elimination of trading costs have further democratized access, making what was once an institutional capability available to a much broader set of investors. 

CM: What structural shifts in investor behavior or technology are driving the move away from traditional passive indexing toward customized portfolios? 

RP: Major shifts at play: 

Market Dynamics: Beating the market is difficult, and traditional passive products leave little room for differentiation. Advisors are increasingly turning to tax efficiency as a new, measurable source of alpha they can deliver to clients. 

Investor Expectations: Personalization has redefined every industry — and wealth management is no exception. Investors now expect portfolios that reflect their unique goals, values, and circumstances. 

Advancement in Technology: Customization and scale were once incompatible. With advancements in technology, we are now living in a world where tens of thousands of custom accounts can be managed by simply increasing computing power and advisors can have an entire investment operating system at their fingertips ready to relay information and adjust portfolio rulesets with a few clicks. 

CM: Custom indexing is the domain of ultra-high-net-worth investors. What has changed—technologically and strategically—that now allows financial advisors to bring this capability to a broader client base? 

RP: Advancements in technology, commissions going to zero, and fractional share ownership paved the way to direct and custom indexing being a more ubiquitous solution. Together, these changes removed cost and operational barriers that once had limited access. As implementation has become more practical over the past few years, we’ve seen an investment in advisor education and process changes to help further drive adoption and entry into the space. 

CM: You’ve mentioned that “custom indexing goes beyond modifying an existing index.” Could you walk us through how a true custom index is built from the ground up? 

RP: Think of ordering a salad. Direct indexing is like choosing the house salad—maybe you ask to hold the olives. Custom indexing is like building your own salad from scratch. 

We have a large traditional direct indexing business where an account tracks an industry benchmark with systematic tax-loss harvesting overlays and maybe some minor restrictions. But the larger share of our business, and what truly differentiates Canvas, comes from accounts that don’t track an industry index. Instead, they follow firm-specific investment models built from capital markets assumptions—covering core equity styles and extending into fixed income, options, and long/short exposures in some cases. 

In essence, advisors and investment teams can design custom models from an open architecture list of multi-asset “building blocks” and then open accounts that track these “custom indexes” according to precise, rules-based specifications which could also include position level restrictions and tilts to reflect existing financial exposures or values. Custom indexing applies the power of direct indexing to more holistic asset allocations. 

CM: How can advisors use these capabilities to demonstrate added alpha or differentiated outcomes versus traditional ETF or mutual fund solutions? 

RP: Finding alpha in the market is hard, but from a tax management perspective, advisors can control how they respond to the market. Through Canvas, advisors can demonstrate that value directly. Our performance portal highlights how portfolios have traded through periods of volatility to capture tax savings and enhance after-tax returns. 

Advisors can also run real-time transition analyses that quantify the tax impact of onboarding new clients or reallocating their portfolios and put them on a path to preserve wealth from day one. 

And beyond taxes, personalization itself becomes a differentiator. Advisors can present portfolios that reflect each client’s goals and values with real precision that’s unmatched with packaged products, deepening client trust and engagement. 

CM: What are the key motivations you’re seeing from financial advisors who are adopting custom indexing—performance enhancement, client retention, or tax efficiency? 

RP: Headline motivations include driving growth, improving operational efficiency, and offering more differentiated solutions for clients. But if we zoom out, wealth management has always been about helping people handle unique financial challenges and turning goals into clear and attainable outcomes. Broadly speaking, we are really starting to see signs of the wealth management ecosystem viewing custom indexing and tax-managed investing more broadly as the optimal vehicle to support the investor’s life journey. 

CM: What are the biggest implementation hurdles, if any, you see for advisors transitioning from model portfolios or ETFs into a custom indexing framework? 

RP: Driving large-scale change is always challenging. With custom indexing, the hurdles often come from some combination of investment onboarding, technology integration, and general education. Many firms are still adapting their workflows and systems to support true personalization at scale. 

That said, the next year will bring meaningful progress. We’re seeing significant investment in advisor training, self-service tools, and best-practice playbooks—all designed to help firms adopt and integrate faster so clients can experience and understand the value of custom indexing sooner. 

CM: What’s your long-term vision for how custom indexing reshapes portfolio construction, client experience, and advisor competitiveness in the next decade?  

RP: We believe the advisor will remain essential. While the advisor–client relationship will evolve, advisors will continue to play an irreplaceable role in guiding clients through life and to financial security. 

Tools like custom indexing will help redefine that experience—especially as technologies like blockchain and AI gain traction. Tokenization and blockchain will expand the investable universe and streamline implementation, while AI will unlock deeper insights, automation, and decision support to help advisors scale their impact. 

Our long-term vision isn’t just about adding more features to Canvas, it’s about creating a single, intuitive system where advisors can manage everything from planning and construction to fulfillment and reporting in one place. If custom indexing platforms can deliver that, the advisors who embrace it will be positioned to provide extraordinary outcomes and deeper client relationships for years to come.