Owning the components of an index rather than the fund opens up tax management and customization that a pooled vehicle cannot offer.
Direct indexing holds the individual securities that make up an index, which means gains and losses can be managed position by position.
For a taxable account with dispersion among holdings, that creates ongoing harvesting opportunities a single fund position simply does not have.
It also allows exclusions — a concentrated employer holding, or a sector the household is already exposed to through the business.