New goal for ETF providers: Help advisers

Less time spent picking funds means more time with clients

Jan 24, 2018 @ 4:20 pm

By John Waggoner

As the ETF industry celebrates its 25th anniversary, exchange-traded fund launches remain strong. But the death toll is rising steadily, and ETF sponsors are focusing more on helping advisers understand their offerings than on pushing new ones out.

This year's Inside ETFs conference in Fort Lauderdale, Fla., was upbeat, with an enormous exhibition hall during the day and parties and afterparties at night. The industry has good reason to celebrate: 2017 was a tremendous year in world stock markets, and the SPDR S&P 500 ETF Trust (SPY), the first ETF, marks its 25th birthday. During that time, the industry has grown from a little fish in the mutual fund pool to a leviathan, with $3.3 trillion in 1,828 U.S. ETFs, according to the Investment Company Institute.

The industry is still pumping out plenty of new ETFs — 278 last year, compared with 249 in 2016, according to Morningstar Inc. But the number of funds washing ashore is growing, too.

"Last year we saw more ETFs close than ever before," said Bill Belden, head of ETF business development at Guggenheim Investments. A record 134 ETFs went belly-up last year, up from 120 in 2016.

Most of the industry's assets are in the largest ETFs. Vanguard Total Stock Market ETF (VTI) and Vanguard S&P 500 ETF (VOO), the two largest ETFs in the Morningstar database, have more than $1 trillion in combined assets.

Many of the largest ETF sponsors don't anticipate large rollouts this year. "We feel like we have a strong core lineup," said Jon de St. Paer, ?senior vice president and head of strategy and product at Charles Schwab Investment Management. He said Schwab would consider only a limited number of new products, such as a few fixed-income ETFs.

Many ETF sponsors are focusing more on how to help advisers use their existing products than on rolling out new ETFs.

"Overall, we've been hearing that advisers are having a hard time keeping up with what's out there," Mr. de St. Paer said. "We've been talking with advisers about how to combine fundamental and market-cap weighted approaches — kind of a "better together" approach." Much of that outreach has involved face-to-face meetings between Schwab and advisers, although the company has also published white papers on its website.

Others are turning to technology as well. "Advisers need help with the part of the business that doesn't involve picking an ETF," said Luciano Siracusano, chief investment strategist at WisdomTree. "We're looking for ways for them to maximize quality time with clients and work more efficiently."

One solution: A digital portfolio developer from WisdomTree that lets advisers analyze a client's portfolio, and suggests ways to reduce volatility and fees.

"We're trying to leverage technology for the adviser, which will free up time for what human beings do best," Mr. Siracusano said.


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