Financial advisors who are seeking an edge can take a look at the quickly growing exchange traded managed portfolios space to utilize customized asset allocation tools and potentially enhance an advisory business.
In an attempt to help shed light on the new breed of ETF strategists behind ETF managed portfolios, ETF Trends and RIA Database hosted the first ETF Strategist Virtual Summit, a virtual conference experience on November 18.
On one of the panels, Michael Jones, Chairman and CIO of RiverFront Investment Group, said that while ETFs may be an easy-to-use investment vehicle, selecting an ETF is not a simple task as investors have to weigh the merits of the underlying benchmark and potential costs.
David Koenig, Investment Strategist at Russell Indexes, also mentioned that potential investors should understand indexing methodologies as no two are the same.
“Within each design category are several key attributes that can vary widely among indexes and produce meaningful differences in exposure even among indexes that target identical market segments,” Koenig said.
Consequently, an ETF strategist can step in to construct a portfolio of ETFs to capture market exposure as efficiently as possible. For instance, Jones points out that ETFs can act as a tactical tool in ETF managed portfolio to dial up or down exposure to a specific market.
ETF managed portfolios are investment strategies that hold more than 50% of assets invested in ETFs and represent one of the fastest growing segments in the separate accounts space. As more investors and advisors adopt ETFs, there is a greater need for assistance in maximizing the potential benefits of the relatively new investment vehicle, compared to traditional asset allocations.
ETF Strategists manage the individual ETF managed portfolio strategies. For instance, Windhaven and F-Squared offer some of the largest ETF managed portfolios on the market. The providers select individual ETFs to fill out a target investment strategy. From here, the strategies are listed on a platform, which advisors can peruse through and select. The ETF managed portfolios help meet the growing investments needs in a changing market environment and allow advisors to free up more time to manage clients and attract new business. [Advisors Carve Out More Room for ETFs In Client Portfolios]
Ben Johnson, Director of Passive Fund Research for Morningstar, reminds advisors that if they are looking at an ETF managed portfolio, the strategy should shore up any gaps within an advisory business and help clients achieve their investment goals. [How ETF Strategists Can Help Your Advisory Business]
“What decisions are you ceding?” Johnson asked. “And by ceding these decisions, can you provide a better level of service to the client? Will adding the strategy have the potential to improve the client’s odds of meeting their financial goals?”
Financial advisors who are interested in learning more about ETF managed portfolios can peruse the ETF Strategist Virtual Summit after the virtual conference is over, view the panels on demand and download research notes or other educational pieces.