ETFs

Best Blogs of the Week

Posted by Anu Heda on Dec 21, 2011, in Best Blogs of the Week , tagged with , , ,

Mid-December usually yields numerous year-in-review and prognostication newsletters, emails and blog posts. Often they are valuable for FAs as they plan and deliver a year-end message to clients and prospective clients. There were two strong posts that share opinions on 2012 and what may occur.

  • BlackRock – No surprise that this post focuses on ETFs. As the ETF vehicle becomes more popular with advisors, then dispelling myths become more crucial.
  • Russell – A succinct review from another great Russell survey shares some helpful opinions and thoughts on what may occur in 2012.

Happy New Year. This is the final BEST of BLOGS for 2011. If you’ve enjoyed, agreed, disagreed, disliked them, please send an email and let us know.

On December 31st, we’ll crown one blog post as the best blog of the year. After that, we’ll resume the review on January 9th.

 

Private Label ETFs

Posted by Anu Heda on Nov 04, 2011, in Thoughts , tagged with

Earlier this week, I read more about private-label ETFs in Registered Rep. What are the primary attractions for independent advisors to present investors with customized ETFs? After all, there are more than 1,100 ETFs available (as of January) and perhaps as many as 1,400.

Here are three ways I can see how advisors may benefit from customized ETFs.

  1. Simpler investment vehicle – As mentioned in the article, separate accounts may be difficult for certain investors – either due to paperwork or account minimums.  ETFs require less (none?) paperwork and very low minimums.
  2. Elevated Profile – ETFs have an elevated profile via successful marketing from Vanguard, BlackRock, and State Street. Investors know of them (more so than separate accounts).  If an investor is trying to get comfortable with his FA, then an ETF is a simple starting vehicle.
  3. Public Track Record – For an FA building a brand on investment prowess, the ETF is a straightforward way to publicize performance.  If an advisor has 50 clients, with 50 separate accounts, then he can’t really discuss performance in any meaningful.  An ETF will show performance publicly.

I disagree strongly with one reason for launching customized ETFs.  The article quotes a few advisors as they discuss reaching new clientele.  That seems improbable.  An investor seeking out new investment vehicles will probably be dubious (to downright dismissive) of new ETFs from advisor firms, considering the thousand-plus options already available.

What do you think?  Send us a message here.

Active vs. Passive Management Debate Rises Again

Posted by Mike McLaughlin on Jan 21, 2011, in Thoughts , tagged with , , , ,

We’ve been asked to address the evergreen debate of active management vs. passive management with several clients of late.  Why?  Many firms with actively-managed mutual funds are experiencing challenges in specific parts of their product lineups (e.g., emerging markets, domestic large cap, etc.), leaving Sales and Marketing execs to answer:

  • How should our wholesalers handle the discussion with an advisor who is using (or considering) index products?
  • How can we counter an advisor’s move toward passive vehicles in our print/online messages?

Over the next week, we’ll use the blog to cover some of the answers we’ve come up with, including:

  • The one question wholesalers should ask advisors who say they use passively-managed products
  • The underlying complexity of investment indices
  • The sometimes imperfect construction of indexed investments

We’ll also cite some of the better research-driven arguments we’ve seen that can help distributors of actively-managed products with this challenge.  Stay tuned…

The Strange Issue of Price Competition in Asset Management

Posted by Mike McLaughlin on Oct 21, 2010, in Thoughts , tagged with , , , ,

Part 1 in a series of posts regarding price competition.

Two articles from last week caught my attention.  Both centered on product pricing.  One suggested a looming price war among ETF providers, which BlackRock downplayed (FT.com, free registration required) just this morning; another reviewed the implications of Vanguard’s lower investment minimums (WSJ, registration required) for its Admiral shares.

Over the years it seems that 99.9% of all articles on fees in the asset management industry revolve around Vanguard.  But maybe my memory is selective; my experience tells me that price competition is very real across the board.

To illustrate, I spent a few minutes reviewing the mutual fund products offered to me by Merrill Lynch.  A review of available equity funds shows:

  • 1,454 have annual expense ratios lower than 1%
  • 253 have annual expense ratios below 0.25%

The 253 funds with the lowest expense ratios are offered by 31 different providers, 24 of whom have more than one fund among the group.  This is not comprehensive scientific research, but confirms what we all know.  Price is an important competitive ingredient in the industry.

So what is the “strange issue” teased in the title of this post?  It’s the fact that price, a critical competitive variable, is almost completely absent from firm and product marketing. Fees are disclosed, but there’s very little overt discussion and proactive use of pricing in marketing strategies.

Isn’t this a big missed opportunity for fund marketers?  More to come…

Advertising to the Investor

Posted by Anu Heda on Oct 10, 2010, in Thoughts , tagged with , , , ,

Last weekend, I opened the Sunday paper and the typical coupons and advertisements fell out.  There was an unusual one – a full page, heavy-card stock advertisement for IAU.  IAU is BlackRock’s iShares ETF that tracks gold’s price.  I never received an ETF or Mutual Fund advertisement via the newspaper.  I asked Mike, my dad and a friend – to the best of our knowledge; nobody had.  Interesting – maybe revolutionary!

The IAU insert from the New York Times. Click to enlarge.

My initial reactions:

  • The ad is pretty clear.
  • The ad must be extremely expensive.
  • The “call-to-action” is pretty generic.

Clarity

The advertisement assumes the viewer is already interested in gold.  Then there are five different reasons to invest in IAU over other options.  From the advertisement, I think, maybe it’s time to invest in gold and maybe I should do that through an ETF.  I wonder if IAU is the best option. My thought process is the best BlackRock can hope for.  So, the message is very clear.

Cost

Is this expensive?  Expense is relative to value or return; so I can’t really say.  Yet, I wonder if BlackRock can measure this ad’s effectiveness.  For investors buying IAU via brokerage accounts, there’s no way for BlackRock to measure those sales.  Potentially, this advertisement is simply seen as an effort to elevate the firm’s brand and products to a more ‘top of mind’ status.  In that context, it’s hard to say if the ad is expensive.

Call-to-Action

The ad lists a telephone number and Web site.  I visited the Web site listed (www.ishares.com/gold).  I want a continuation of knowledge sharing, instead it’s a bit repetitive.  Initially, I see the same bullets; when I click “Learn More,” I’m immediately sent to the Fund Overview page.  This Call-to-Action isn’t strong enough.

I’m curious to what you think.  Good idea for industry leaders like BlackRock?  Does the idea scale down well to other firms?