Managed ETF Portfolios

March 5th at 2:30pm by Tom Lydon

Managed portfolios of exchange traded funds previously came with high account minimums which may have turned some investors off. Advisers are beginning to reverse this trend and are aiming for a wider slice of the market.

“Since these are essentially separate accounts put together by institutional-level portfolio managers, it can take $100,000 or more to qualify,” Scott Burns, head of ETF research at Morningstar, said. [ETF Managed Portfolios: The Next Big Thing?]

Advisory firms manage all-ETF portfolios for some investors, but the catch is relatively high account minimums. As more individual investors show interest in ETFs, the higher account minimums are not suitable. In turn, some of the larger advisory firms are lowering account minimums to help target a bigger investor pool.

The catch is that the minimums are applied to each account, so if an investor had enough to cover the management services but not enough in retirement or other accounts, they could not get complete management, reports Murray Coleman for MarketWatch. [Why Separate Account Managers Like ETFs]

Some advisers have stayed away from the managed-portfolio approach and are tailoring research to cater to clients assets. Some observers within the industry think it may be a bad idea to cater to less-affluent investors which would equal less profit margin and waning growth in the managed ETF portfolio market. [ETF Model Portfolios Should Come With More Education]

Senior vice-president of Wells Fargo, Samantha Samana said that the aforementioned would be true of smaller asset management companies. Wells Fargo, which manages $7 billion in managed ETF portfolio assets, has a minimum requirement of $25,000. More sophisticated strategies come with a minimum $50,000 requirement, reports Coleman.

“We wouldn’t be opening those accounts at such minimum levels if it wasn’t profitable,” Samana added in the story.

“An organization with less scale and less ability to leverage its resources might find servicing investors with smaller portfolios a challenge,” John Moninger, executive vice president of advisory and brokerage consulting services at LPL, said. “But we’re in a position to provide advisers with a broad range of ETF platforms so that they can work with clients of all portfolio sizes. We feel like that’s an important element for a wealth manager to keep adding to their customer base.”

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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