The world’s biggest ETF conference took place last week in sunny Fort Lauderdale, Florida. ETF.com’s annual Inside ETFs Conference was another success as were the previous seven conferences. But this one was different (I attended the last four). This time the ETF community stood tall and is no longer “up and coming” or no longer just a “force to be reckoned with”.
The statement was made and it was clear to all 1,900 conference attendees- ETFs are here to stay and it’s time to adapt or be left behind.
It’s easy to make a pronouncement like that because of how the conference was constructed and how the attendees, sponsors and speakers interacted. The content was first rate, delivered in a digestible manner and the message to advisors was clear; we are all here to help you make better informed decisions.
Every major ETF sponsor in the U.S. was represented and even though they have different market views and varying product suites, their goal was the same- educate.
I spoke to some of the ETF sponsor to better understand what they wanted to get out of the conference and why they were there. The responses were remarkably similar. They wanted advisors to better understand how to use ETFs in their portfolios. That no matter what an advisor’s market view is there is an ETF available to support their strategy. Whether it is access to low-cost core investments or access to precise and targeted investment strategies.
There is an abundant amount of ETFs and indexes. Navigating the space can seem daunting but the industry is spending a tremendous amount of time with advisors to help them discover the best path for their clients.
I sat down with Jim Rowley of Vanguard and he articulated it very clearly; indexed funds--whether ETFs or mutual funds-- are the best tools that advisors can use to access the markets with precision. Mr. Rowley continued by stating that using broad market indexed funds rather than chasing the current in-fashion theme was the advice that Vanguard was giving their clients and potential clients; "We stress with advisors that by incorporating either index funds or index-based ETFs into a client's portfolio, they can lower costs, increase diversification, and improve tax efficiency"
You can view Mr. Rowley’s research here.
Separately, Tony Davidow, Vice President, Asset Allocation for Schwab's Center for Financial Research offers a slightly different view. He believes that there is a role for active, market-cap and fundamental index strategies. “Active managers are able to adjust their portfolios based on current market conditions, and many are better equipped to play defense then passive strategies” states Tony. “Market-cap indexes typically provide the lowest cost exposure to an asset class; while fundamental index strategies have historically delivered excess returns.”
You can view Mr. Davidow’s analysis in his white paper “Alternative Beta Strategies."
The active “vs” passive debate continued at this conference as it has at many ETF conferences the last several years. However, at ETF.com’s Inside ETFs conference the debate has matured to the active “and” passive and when and how to deploy those strategies. That debate is no longer about mutual funds and indexed ETFs but now includes the use of active ETFs both transparent and non-transparent.
No matter what you belief is in the active and passive debate there is plenty of material available to help you make those decisions before you deploy your investment dollars.
I have always been one who was disappointed that there is not a single industry sponsored website or other educational tools for advisors to go to learn about ETFs. The best way to navigate ETF education is to go through several of the ETF sponsor’s websites as they all have “ETF 101” sections or in some cases they call it an “ETF University”. For those advisors trying to catch up to the ETF momentum these are great resources. Both the novice and the advisors, who are more experienced in ETFs can dive deeper into those sites for more clarity and can always reach out to the sales desk of an ETF sponsor to get more materials and talk directly to their staff.
The effort to educate yourself on ETFs is well worth the time. Even an ETF “insider” like myself who spent the last 10 years in the industry was able to add to my own edification of ETFs just by talking to the industry professionals at the conference.
Seek and you shall find!
Education has always been a priority with the ETF industry but now it is a passion.
There were many more interesting findings at the conference that I will share in upcoming articles. I left Florida without a tan but with great pride in being part of the ETF revolution that is taking place and even prouder to be associated with the people in the industry who are working hard so that advisors can make better informed decisions.
Richard Keary is the Founder/Principal of Global ETF Advisors LLC, an independent management consulting firm that specializes in the Exchange Traded Products industry.His firm offers advisory services designed to help clients launch exchange traded products and to assist start-up companies in building their corporate and business development strategies.