ETF Model Portfolios Target Financial Advisors
December 4th 2012 at 10:24am by John Spence
Packaging ETFs together in so-called model portfolios for financial advisors and their clients will continue to be a key driver of the industry’s growth in coming years. The low-cost and index-based financial products are ideal portfolio building blocks.
Market share leader BlackRock (NYSE: BLK) is pushing its new model portfolio services to help advisors utilize ETFs and learn more about how the funds work, Ignites.com reported recently.
“The model portfolios are the latest visible sign of BlackRock’s move to more closely align the iShares exchange traded fund group with other parts of BlackRock’s business, and part of CEO Larry Fink’s strategy of providing a variety of investment capabilities to meet client needs,” according to the report.
Another sign of the importance and integration of the ETF business at BlackRock is the recent promotion of Russ Koesterich to chief investment strategist, a new role at the firm. Koesterich will continue to serve as global investment strategist for BlackRock’s iShares business, a role he has held since 2010.
Part of BlackRock’s strategy is to offer model portfolios including ETFs as a way to help advisors combine active management and passive products, Ignites reports.
Some advisors have been using ETFs for years to implement asset-allocation models. The ETF structure is “by far the best way” to invest in broad areas of the market, says Steve Cucchiaro, chief investment officer at Windhaven Investment Management, a subsidiary of Charles Schwab (NYSE: SCHW). [Windhaven Chief: Why ETFs are the Best Portfolio Building Blocks]
In the ETF managed portfolio space, there were 500 strategies through June with 48% asset growth and $50 billion in assets, says Andy Gogerty, ETF managed portfolio strategist at Morningstar. Small firms are building ETF managed portfolios for their own clients as well as for other advisors who want to spend more time on financial planning with individuals they work with. [Advisors Like ETF Managed Portfolios for Low Costs, Diversification]
“As advisors increasingly incorporate ETFs and passive investments into their fee-based portfolios — to the tune of 8.7% of all fee-based portfolio assets, according to Cerulli Associates — model portfolios and managed accounts are an increasingly popular tool to blend active and passive,” Ignites reports. “While managed accounts traditionally are the domain of separate account managers, ETF model portfolios are designed by product providers, brokerage home offices and third parties.”
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