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For decades, the S&P 500 has been the measuring stick for nearly every investment conversation. Advisors, clients, and even the financial media treat it as the universal scorecard. But that focus has a hidden cost. It can distract clients from what really matters: the alignment between their investments and their goals. The real benchmark is not a market index. It is the client’s financial plan and whether it is on track to deliver the outcomes that matter most.
From Index Thinking to Outcome Thinking
My career began during a time when the investing world was undergoing a transformation. I was part of a generation that brought innovation, technology adaptation, significant market structure changes, financial product engineering, and discipline as the regulatory environment was also changing drastically. We focused on a systematic approach, risk management, and measurable indicators that could guide portfolio decisions objectively. Later, I was fortunate to contribute to the early development of exchange-traded funds, ETFs. ETFs represented more than just a new product. They were a breakthrough in access and efficiency, giving investors and advisors tools that reduced costs and improved transparency.
Those experiences shaped how I view innovation. It should not exist for its own sake. Rather, it should serve the advisor-client relationship and bring portfolios closer to the client’s purpose. The same principle applies today as tools such as direct indexing and other innovations enter the conversation, benefiting from technological advances. Direct indexing is not just a tax strategy or a way to replicate benchmarks more precisely. It represents the next stage of personalization, allowing advisors to express the client’s goals, values, and risk tolerances directly in their portfolios. It helps connect the structure of an investment strategy to the substance of a plan.
The S&P 500, by contrast, is a useful data point but an incomplete destination. It reflects only large U.S. equities and says nothing about cash flow needs, tax exposure, or a client’s risk budget. But too often it becomes the default conversation.
Advisors know that when markets rise faster than a diversified portfolio, clients can feel left behind. When markets fall behind that same diversified portfolio, they may feel comforted, even if volatility has knocked their plan off track. No single plan fits every investor, and only a plan that takes each investor’s life situation, goals, risk tolerance, and time horizon into consideration can hope to meet the individual’s investment goals.
Redefining the Benchmark Around the Plan
A plan-based benchmark changes the advisor’s role from portfolio reporter to progress partner. Instead of reviewing performance against a market index, the discussion can focus on metrics such as cash flow resilience, adherence to the risk budget, and after-tax outcomes. These measures are far more reflective of a client’s real-life objectives.
For example, a retiree’s portfolio may be designed to sustain 4% annual withdrawals while preserving principal. If that objective is met, then the portfolio is successful, regardless of whether it outperformed the S&P. Similarly, a younger client saving for future goals may care more about tax efficiency and compounding than short-term relative returns. Advisors can show value by maintaining discipline within the plan’s parameters, even when headlines or peer comparisons tempt clients to chase performance.
This framework also gives advisors a natural language to discuss modernization of investment tools. Direct indexing, for instance, allows for precise tax management and customization. By owning the individual securities of an index rather than a pooled fund, advisors can harvest losses strategically, tilt toward certain sectors or values, and align exposures with the client’s plan rather than a product’s prospectus. That kind of personalization reinforces the concept that the plan, not the index, defines success.
Shifting the Conversation With Clients
Changing how clients think about success takes intention. The S&P 500 will not disappear from conversations overnight. But advisors can begin to shift the dialogue with consistent framing and clear examples. Instead of saying, “We kept pace with the market,” advisors can say, “We stayed aligned with your plan.” Rather than focusing on quarterly performance, they can highlight how the portfolio maintained its income stream, preserved risk discipline, and captured tax advantages that improve after-tax returns.
This approach does more than reduce anxiety during volatile markets. It builds trust. When clients see that their advisor is measuring success through their own goals, they become less reactive and more confident. They understand that the portfolio is not chasing the market but serving their life goals.
Innovation in investment management will continue, just as it did with ETFs years ago. Refined investment approaches that take advantage of improved analytics and enhanced tax tools will give advisors even greater ability to personalize strategies. But the purpose remains constant: to translate market opportunity into meaningful client outcomes.
The S&P 500 will always have its place as a reference point, but it should never define success. The only benchmark that matters is the one written in the client’s plan — the one that funds their goals, reflects their values, and gives them confidence in the future.
Joseph Rizzello is chairman and CEO of NewSquare Capital.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
