Working with an ETF strategist is a new and unknown process for many financial advisors. Consider this 5-step process when choosing and working with an ETF Strategist:
Step 1: Client Profiling:
What are your preferences for:
- ETFs or Mutual Funds
- Risk tolerance
- Investment objectives
Step 2: Portfolio Construction:
Consider using new asset allocation techniques so your investing can be more flexible and dynamic. Examples include:
- Combine ETF strategic strategists with tactical ETF strategists
- Combine global or equity strategists with ETF fixed income strategists
Step 3: What to consider when choosing an ETF Strategist:
- Is the organization stable and will it likely continue to be that way while managing your clients’ money?
- Do they possess sound, fundamental investment beliefs that are being shaped into a consistently applied process?
- Are the data and decision making processes and people responsible for them reliable and intact?
- Does the historical record of the investment performance demonstrate consistency of style and persistence of skill that produces a value add?
Step 4: Ongoing ETF Strategist, Monitoring, and Evaluation:
- Monitor progress to goals
- Review ETF strategists’ trade rationales
- Understand ETF strategist investment decisions
Step 5: Portfolio Review:
- Consider rebalancing
- Review with client:
- Investment objective
- If anything has changed, review ETF strategist options
- Focus on ETF strategist retention
- Use multiple strategists to create diversification for client
Key items to remember in the process:
- Show your clients their profile findings that helped you determine the appropriate asset allocation
- Help your clients understand the ETF strategist search and selection process and how the selections were made based on their individual needs and goals
- Demonstrate your plan for the portfolio by showing them the risk/return illustrations of how the ETF strategists will combine to diversify risk and enhance overall return