Charles Schwab has been working closely with financial advisors to gauge their interest in ETFs and how they utilize the investment tool to diversify their portfolios.
“There’s a change in the way that advisors do business and the way they incorporate any tips and their practices,” Anthony Davidow, Vice President, Alternative Beta & Asset Allocation Strategist, Charles Schwab Center for Financial Research, said at the Charles Schwab IMPACT 2018 conference.
Charles Schwab has conducted surveys of its clients and financial advisors to find out their investment habits over the years. Over recent years, they have also included questions concerning ETF usage and smart beta adoption.
“Four or five years ago, the quest was, ‘Do they work?’ and now, we’ve kind of morphed into, ‘How do they work? How do I distinguish between the myriad of strategies?’ and more importantly, ‘How do I incorporate them better in my portfolios to have better outcomes?'” Davidow said.
Davidow also pointed out that demand for ETFs continues unabated with flows on the Schwab platform up 30%, “so we’re seeing a lot more interest in these smart beta strategies.” Additionally, through the survey, Schwab is able to hone in on the types of strategies that ETF investors are more interested in, such as value, growth, quality and fundamental indexing.
Charles Schwab also offers a suite of “intelligent-” or “smart-“beta index-based ETFs, including:
- Schwab Fundamental U.S. All Company ETF (FNDB) tries to reflect the performance of the Russell Fundamental U.S. Index, which includes components from the Russell 3000 Index.
- Schwab Fundamental U.S. Large Company ETF (FNDX) tries to reflect the performance of the Russell Fundamental U.S. Large Company Index, which includes the top companies that weight above 87.5% from the Russell 3000 Index.
- Schwab Fundamental U.S. Small Company ETF (FNDA) tries to reflect the performance of the Russell Fundamental U.S. Small Company Index, which includes the bottom companies that weight below 87.5% from the Russell 3000 Index.
- Schwab Fundamental International Large Company ETF (FNDF) tries to reflect the performance of the Russell Fundamental Developed ex-U.S. Large Company Index, which includes companies with weights above 87.5% of the Russell Developed ex-U.S. Index.
- Schwab Fundamental International Small Company ETF (FNDC) tries to reflect the performance of the Russell Fundamental Developed ex-U.S. Small Company Index, which includes companies with weights below 87.5% of the Russell Developed ex-U.S. Index.
- Schwab Fundamental Emerging Markets Large Company ETF (FNDE) tries to reflect the performance of the Russell Fundamental Emerging Markets Large Company Index, which includes companies with weights above 87.5% of the Russell Emerging Markets Index.
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