Private Label ETFs
on Nov 04, 2011
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.
- 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.
- 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.
- 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.