This is a summary of a session from the Money Management Institute’s 2012 Fall Solution Conference entitled ETFs: To Develop or Not Develop? This is part one of a two-part series. You can jump to part two by clicking here.
- Benjamin T. Fulton, Managing Director of Global ETFs, Invesco Powershares Capital Management, LLC
- Sam Turner, Director of Large Cap Portfolio Management at Riverfront Investment Group
- Jill Iacono Mavro, Managing Director, Head of National Accounts, State Street Global Advisors – $337 billion in ETF assets globally, 94% in US, SPY launched in 1993
- Dodd Kittsley, Senior Product Manager & Head of ETP Research, iShares
How has the trend of advisors shifting towards Rep as Portfolio Manager (RPM) changed your business model?
Turner believes RPM is more of a challenge than a threat since it is the end client experience that matters. Competition from RPM raises the bar, with each crisis causing a shakeout of weaker products and players. The next crisis may not be a market downturn but could be a repeat of 2009 when many government central banks were trying to stimulate their economies through quantitative easing, he said.
Many of the advisors who Turner has spoken to are over-weighted in cash because their client’s are nervous. If the market continues its current upswing into 2013, then this lack of participation could be a risk for these advisors, he warned. Their clients may fire them because they were too cautious.
RPM has also been a huge growth engine outside the US, Kittsley stated. Financial transparency rules enacted in the UK will be a huge catalyst for growth in that market. ETFs are well-suited for managed books of business.
StateStreet’s distribution efforts started in the RIA segment, Mavro explained. They treat it more like an institutional service model. iShares and PowerShares have been focusing on RPM for many years and it has become a differentiator for them on larger platforms Regulatory reform targeting advisors running discretionary portfolios often result in more outsourcing, which benefits firms like Riverfront, she claimed.