Will ETFs kill the mutua fund business?

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Mar 14, 2006 7:22 pm

client’s can sell calls against some of their ETF holdings (the ETFs
that are optionable), this might sit well with people who want some
income…

can’t do that with mutual funds…

Mar 14, 2006 7:22 pm

Stok

You take yourself way too seriously.  This board is all about freedom of expression and perspectives .  Unfortunately for some goofy posters like you I tend to back mine up with FACTS that can not be disputed. 

Do you not like me because I am telling the truth? Or do you not like me because I use too many emoticons?

Thanks for giving me an others a laugh!     

Mar 15, 2006 10:08 am

A friend of mine has attracted a few very large accounts using
ETFs.  He has developed several models using only 6 ETFs. 
Large cap value, small cap growth, gold, short term treasuries, natural
resources, and international.



He says that people have responded well to the simplicity of the whole thing as well as the costs and expenses.

Mar 15, 2006 12:03 pm

[quote=Lance Legstrong]

TJ all of those "reasons not buy an ETF" will get you laughed out of the room with sophisticated money.

All I am saying that a client can set up a very prudent risk adverse portfolio using ETFs and avoid the cost structure of a conventional mutual funds.  99% of the risk/return is going to be in allocation not from a manager.  

Of course if your sales tactic is to make stuff up and lie to the client - then maybe you should be driving a truck. 

Besides CDs and Treasury Bonds the only thing certain about any investment program is the cost/expenses that begin to acrue tomorrow.  Can anyone care to dispute the math on this concept?

The reality is that the light is beginning to shine on all of these excessive fees that mutual funds charge and that might indeed put some of you fellas behind the wheel of a truck where you belong!

What is really funny when I see some clown do a mutual fund comparison and reccomendation for a client or prospect. Again - past performance is not a indication of future results!   Why don't you just get out a voodoo doll and your crystal ball - the math is the same! 

[/quote]

Hey what's wrong with driving a truck? You speak of it like it's something bad. It's honest hard work. I'm hoping the bird flu doesn't screw up my chances to haul frozen chicken parts across the country driving a Kenworth T2000 Super Condo for Stevens Transport for 5 week stretches at a time.

NEWS FLASH!

The light has been shining on mutual fund fees for years. Where you been Lance?

On another note, the failure to close the client in question had nothing to do with ETFs or mutual funds. As most of the advisors using this forum recognise, both are useful products with pro and con features and should be utilized as the situation warrants on a case by case basis.

This situation, the client going with another advisor, was a sales failure. No shame in that, no one closes 100%. To keep from losing future cases it's necessary to develope strategies to sell against competitive products and advisors. If you've done the work for the client, have access to all solutions, and are offering the best solution for the client, and find yourself in a competitive situation, it's time to put on your selling shoes and close the client. Most of that is acheived by reviewing the benefits of your solution not only for the client's situation but also versus the competition.  Lance, I'm sorry you didn't get the sarcasim in my previous post, everyone else did. I guess I should have used an emoticon. My fault

Lance, if you were an advisor, broker, agent, bank rep, you'd understand this as well as we do. But, you're not any of these things are you?

Lance, are you a day trader, bored troll, or were you finally outed on Myspace.com?  

Mar 15, 2006 1:07 pm

Hey you fellas are pickin on Ol' Lance, I think you should apologize.

I ride a bike - I don't know nothin' about these fancy mutual funds and wrap fees and sales tactics.  Y'all sound like big city slickers talkin' about this complex stuff.  Good thing y'alls clients can trust you fellas to figure all of these loads and fees and dem things called 12b1 fees!

Mar 15, 2006 5:08 pm

Hey Skee… If one were to come up with a few different models with EFA’s how does the PFA generate income.

Is this under the whole A-B-C concepts? Or does the PFA add an expense based on the size of the account??

Any information to guide a newbeeee is greatly appreciated.

Mar 15, 2006 5:10 pm

Sorry I meant ETF’s.

Mar 15, 2006 7:53 pm

As far as I know he adds only 65 to 90 basis points as an advisory fee. So

far, there isn’t alot of turnover but that can change based on market

conditions. I don’t know much more than that.

Mar 16, 2006 2:57 am

Lance,

     You sound like Suzie Orman in early 2000.  Buy the index and forget about it.  3 years later your clients are looking at a 45% loss.  ETF's are a good strategy for those areas where good managers are tough to find, but they certainly are not a cure-all.

    Let's hope we don't have a flat market remnant of the '66-'82 time frame.  If that happens, all the index believers will have their hinees handed to them. 

    Here's a few suggestions to kill an all ETF portfolio, I'll just take a look at the fixed income side. 

    First, take a look at the total bond market index ETF, then compare it's return to the return reported by the actual index used in comparisons.  Why does the ETF lag by so much?  Because no ETF can truly purchase the total bond index.  That's a serious weakness.

    Second, in a year like '06 when the first couple quarters will most likely be a rising interest rate environment, a laddered CD approach makes a lot more sense than most fixed income ETF's by guaranteeing a client 5% net after fees on an insured portion of a fixed income portfolio.

    Third, why not use death benefit bonds for elderly clients to average 6% net until they pass and then give the spouse or heirs the option to cash out at full face value upon passing?

    Fourth, for clients in high tax brackets that are hit with AMT, I'm not familiar with any non-AMT ETF's, so why not ladder some short term muni's that are non-AMT to get the best bang for the buck? Or use a proven performer like Oppenheimers non-AMT fund?

    Fifth, if the base rates stays moderate to low, let me know how a TIPS ETF will outperform a single 5-year TIPS when they are paying a base rate of 2%?

    Sixth, if you have managers like those on the RVT beating the index for over a decade strait, it can't be all blind luck.  That's why a good manager can run circles around an ETF, especially in a bear market environment.

I could go on longer, but I'm bored.

Mar 16, 2006 8:22 am

Y'all are a lot smarter than me.  I only gots about a billion or so aum with dem ETFs.  I guess I am doin the wrong thing, maybe I will give some of your clients a call and make y'all look like fools

Mar 17, 2006 8:03 pm

anyone see the CNBC interview today somewhere between 4:00-5:00 ? 
the host asked the CEO of ishares if EFTs were going to kill the mutual
fund business…