At VettaFi we aim to keep our finger on the pulse of investing. Every year, we conduct over 300 polls and host well over 200 digital community gatherings for investors and financial advisors. Thus far, over 11 million unique investors have visited VettaFi online this year to engage with our content or use our tools. More than that, we talk to actual advisors and fund issuers of all sizes every single day to better understand what makes them tick and how we can help. We listen with the intent to understand, and we look for patterns. Here are some headwinds and tailwinds that sales and marketing leaders in financial services face in 2023.
Headwinds
- Data or die. The world is digitally transforming at an accelerated rate, and the next generation of investors are digital natives. Smart organizations use that digital-first mindset to track investors’ “Data DNA” for all segments of their market, and the best organizations create an accessible and secure single source of truth (SSOT) to monitor and engage their customers.
- It’s a crowded marketplace. Even brilliant new ideas must compete in the marketplace for attention —especially in maturing markets. With nearly 400 new ETFs launched in the US in 2022, differentiation matters now more there ever. The best product issuers know how to articulate their offering’s value proposition quickly and effectively. Truly excellent communication has the power to cut through the noise.
- Fee compression. In the ETF Market — although this applies in many markets today — the cheapest tranche of products is already priced at or below the marginal cost of production. Any product charging more than 10 bps needs a solid story to back up that cost. That’s less dramatic than it might seem: plenty of products charging 20–50 bps for unique exposures, or even over 75 bps for unique processes or talent, have been successful. The trick is being honest with yourself about where your value truly lies.
- The great reshuffle. Attracting and maintaining talent has always been paramount, but it has arguably never been harder. A combination of profound social changes throughout the COVID-19 pandemic means that workers have more leverage than they’ve had in a long time. This means making hard choices on everything from WFH policies to how teams are organized to leverage tools now commonplace from the Pandemic.
Tailwinds
- ETFs and Indexing. Passive strategies and ETF wrappers have come to dominate the investing zeitgeist. That’s unlikely to change anytime soon. ETFs are on track for their second best year in history, with low-cost indexed solutions still garnering the lion’s share of assets. The era of having to explain how an index or an ETF works is rapidly coming to a close.
- Fixed-Income. For the first time in nearly a generation, investors have access to meaningful income generation and capital preservation through the bond markets. However, innovation in bond indexing and bond portfolios has a lot of catching up to do. Everything from how individual bonds are traded to how bonds are analyzed and used in portfolios is open for improvement.
- Resurgent Retail. Despite 2022’s volatility and retail’s reaction to crypto news, a new generation of investors has been hooked on managing their own money, whether through Robinhood or Vanguard. There’s little sign that the pandemic wave of retail is retreating back to putting money under the mattress.
- Ownership Values. From ESG investing to Meme stocks, the idea of *owning* the companies one invests in has become part of the American cultural landscape. For better or worse, what you invest in has become a way more and more Americans are expressing what they believe in. A new wave of portfolio personalization is coming, creating a massive runway for product innovation and even more satisfied customers.
Let’s Keep the Conversation Going
If you haven’t heard, we’ll be discussing how to capitalize on these tailwinds and mitigate the headwinds at Exchange, coming February 5-8th. Join 2000 members of the investment community in Miami Beach and connect with financial advisors, thought leaders, and industry experts.
To learn more about the event and register, please visit the Exchange website.
For more news, information, and analysis, visit VettaFi | ETF Trends.