What Are ETF Strategists and ETF Managed Portfolios?

In the separate accounts space, the rapidly growing exchange traded managed portfolios provide financial advisors with a way to enhance their advisory businesses. However, more education will be required before the industry can take off.

On the recent webcast, Utilizing ETF Strategists to Enhance Your Advisory Business, sponsored by PowerShares and State Street Global Advisors, Adam Grossman, Director of Tactical Strategy for RiverFront Investment Group, Robert D. Williams, Managing Director for Sage, and Brendan Clark, President of Clark Capital Management Group, help explain what ETF strategists do and the best practices for incorporating ETF managed portfolios into an advisory businesses.

Specifically, ETF managed portfolios are investment strategies that hold more than 50% of assets invested in ETFs. A group of ETF Strategists package portfolios of ETFs into investment strategies to meet a wide range of investor demands, providing stand-alone investment strategies or a one-stop complete offering. Many portfolios can be adjusted to adapt to changing market conditions and most employ a rules-based process based on technical or quantitative factors.

According to Morningstar, there were 667 such strategies from 145 firms with $102 billion in assets under management as of June 2014, with existing managers still expanding on their current product offerings.

While the ETF managed portfolio is still growing, many advisors are unfamiliar with ETF managed portfolios and the ETF Strategists who manage the accounts, according to a recent survey of financial advisors.

Consequently, it is not surprising that many advisors have not partnered with an ETF Strategist.

Nevertheless, the ETF managed portfolios space is poised to grow as more advisors adopt the strategies. As demand for financial services expand, partially aided by aging demographics among the group of Baby Boomers, and innovation in product development accelerates, there is greater need for assistance to optimize the potential benefits of the ETF investments.

Through a partnership with an ETF Strategist, advisors can enhance their practices by freeing up more time to manage client relationships, utilizing tactical asset allocation tools, shifting out of traditional asset classes in increasingly volatile market conditions, and increasing focus on delivering a more personalized performance that caters to investors’ outlook.

Advisors who have decided on partnering with ETF Strategists don’t typically hand over all investment decisions. Many have just outsourced a portion of their client portfolios to an ETF Strategist, with the most common allocation coming in at around 20% to 40% of client portfolios.

Financial advisors who are interested in learning more about ETF managed portfolios and ETF strategists can listen to the webcast here on demand.