Portfolio management isn’t the only part of financial planning ETFs have affected
While they still represent a tiny part of the investment-fund industry overall, the growing impact of ETFs is undeniable — and it goes beyond their intrinsic advantages over other investment products.
The price advantage is a significant draw, with a new survey by Schwab reporting 27% of retail ETF investors saying they compose at least a quarter of their portfolios’ value, according to Financial Advisor IQ. Another 42% said ETFs will be their primary investment vehicle in the future; millennials showed stronger support, as two thirds of those born in the ‘80s and ‘90s agreed with that statement.
Paul Tramontozzi, an advisor with New York-based KBK Wealth Management, said that clients and prospects would often ask about specific ETFs even if he says nothing or very little about them during a discussion. And because of the simplicity of ETFs, particularly index-based ones, less time is spent discussing investments costs and outcomes. That’s let him focus on other planning concerns.
For better or for worse, the wider range of index ETF products appears to be increasing the level of passive investment retail investors do. At the level of client conversations, it’s reportedly making things easier for advisors.
“There’s a whole layer of discussing what active management does relative to its benchmark, and those conversations take resources and time,” Sterling Neblette from Centurion Wealth in Virginia told the publication. “[With index ETFs,] you don’t even have to go there: the index does what the index does, and an ETF will always slightly underperform” its benchmark because of internal costs.
Index ETFs aren’t a silver bullet, but Neblette said ETFs that can track the returns of “big indexes” make sense in many cases. While incorporating or switching to an active strategy will complicate discussions, it’s a necessary burden if it’s what’s best for the client.
While investors can get exposure to many ETFs themselves through robo-advisors, that’s not always the best approach. Greg Gulick, a Dallas-based advisor with Nations Advisors, said investors are typically “less focused than they should be on risk.” With the right firm, clients can get investment management that considers everything: risk tolerances, time horizons, and costs.
“There’s a lot of talk about robo advisors but we can offer more customized portfolios – often at even lower fees than robos,” he said.
For more of Wealth Professional's latest industry news, click here.
Related stories:
Responsible investing just a trickle in ETF torrent
ETF bubble, or risk pockets and distortions?
The price advantage is a significant draw, with a new survey by Schwab reporting 27% of retail ETF investors saying they compose at least a quarter of their portfolios’ value, according to Financial Advisor IQ. Another 42% said ETFs will be their primary investment vehicle in the future; millennials showed stronger support, as two thirds of those born in the ‘80s and ‘90s agreed with that statement.
Paul Tramontozzi, an advisor with New York-based KBK Wealth Management, said that clients and prospects would often ask about specific ETFs even if he says nothing or very little about them during a discussion. And because of the simplicity of ETFs, particularly index-based ones, less time is spent discussing investments costs and outcomes. That’s let him focus on other planning concerns.
For better or for worse, the wider range of index ETF products appears to be increasing the level of passive investment retail investors do. At the level of client conversations, it’s reportedly making things easier for advisors.
“There’s a whole layer of discussing what active management does relative to its benchmark, and those conversations take resources and time,” Sterling Neblette from Centurion Wealth in Virginia told the publication. “[With index ETFs,] you don’t even have to go there: the index does what the index does, and an ETF will always slightly underperform” its benchmark because of internal costs.
Index ETFs aren’t a silver bullet, but Neblette said ETFs that can track the returns of “big indexes” make sense in many cases. While incorporating or switching to an active strategy will complicate discussions, it’s a necessary burden if it’s what’s best for the client.
While investors can get exposure to many ETFs themselves through robo-advisors, that’s not always the best approach. Greg Gulick, a Dallas-based advisor with Nations Advisors, said investors are typically “less focused than they should be on risk.” With the right firm, clients can get investment management that considers everything: risk tolerances, time horizons, and costs.
“There’s a lot of talk about robo advisors but we can offer more customized portfolios – often at even lower fees than robos,” he said.
For more of Wealth Professional's latest industry news, click here.
Related stories:
Responsible investing just a trickle in ETF torrent
ETF bubble, or risk pockets and distortions?
