The financial industry keeps coming out with innovative tools, such as exchange traded funds, to help investors and financial advisors access the markets.
ETF Trends publisher Tom Lydon spoke with Ben Johnson, Director of Global ETF Research at Morningstar, at the 2017 Morningstar Investment Conference in Chicago April 26-28 to talk about what is new and exciting in the financial world.
“Advisors are looking at their jobs; they’re looking at the challenges that they are facing and that their clients are facing increasingly from a more and more holistic point of view, so less about picking stocks, picking managers, less about picking winning funds,” Johnson said. “More about portfolio construction, more about a more comprehensive holistic view of constructing solid financial plans and scanning the marketplace to understand what are the latest and greatest in terms of tools and developments that can help them to make their practices more efficient, to bring all this to bear, to drive good client outcomes.”
It is no longer security selection and individual market focuses. Financial advisors are now taking a step back to re-evaluate the way to handle their money managing businesses.
Looking at the ETF industry growth as more advisors and investors jump on the investment vehicle, many still anticipate that ETFs have more room to run.
“It’s getting bigger by the day and advisors, investors are faced with a huge amount of choice, so the Reformed Broker… he said if anything, now is a terrible time to be an investor because there’s too much to choose from,” Johnson said.
There are now about 2,000 U.S.-listed ETFs on the market with many different products from various fund sponsors, and many cover the same types of investment themes. Basically, investors are spoiled for choice.
“It’s difficult to choose,” Johnson said. “You’ve got all these different types of strategies, all of which from face value looks to be very similar that produce very different outcomes. It creates a real challenge for advisors when it comes to fund selection.”
Consequently, Johnson suggests that investors and advisors should just keep it simple. Look for the strategies that are easy to use and easy to understand while focusing on those that also come with low costs to optimize returns or have the “best odds of driving good outcomes for investors,” Johnson said.