James Shelton, CIO of Houston-based wealth management firm Kanaly Trust, states that as with most investments, you need to do your due diligence, including taking a look at fees, the management team and their buy/sell discipline. [ETF Model Portfolios Should Come with More Education]
Lindenbaum also notes that advisors need their own due diligence to find out if the comparable benchmarks are appropriate for a portfolio’s particular strategy.
“It’s what the new financial advisor needs in the absence of having a massive research department of people covering everything under the sun,” Joshua Brown, advisor at Fusion Analytics, said in the article.
Nevertheless, when it comes down to it, there is no right choice between index or passive. It may be down to an advisor’s ideology.
“Anyone who says every dollar should be passively or every dollar should be actively managed is an ideologue,” Brown added. “I feel bad for the client whose advisor is so doctrinaire that they won’t even consider one or the other.”
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.