It’s a decal. The bit of in the video was a part of the top-down template in UE4, now replaced with a fancy Niagara effect.
Think of it as of a sticker that is projected onto a surface that can be, optionally, moved around. See docs below for details, but the gist is:
- create a decal material:
- add it to the character and show it where the cursor hits geometry:
More info: