All in proportion

Our news this week brought a thought piece from Athanasios Psarofagis and Eric Balchunas of Bloomberg Intelligence who have identified that most financial advisers in the US believe that buying ETFs from BlackRock or Vanguard is equivalent to buying IBM shares in the 1980s – no one is going to fire you for doing it. As a result, the firms continue to grow and to dominate the ETF industry. A recent industry survey found that advisers’ most important factors when selecting an ETF are expense ratio and the issuer’s brand, according to BI.

"Expense ratio was cited as the most important factor when selecting an ETF, followed by issuer. In other words, when an adviser is looking for an ETF, it isn’t just the fee that matters, but also the brand name. Those two factors were reversed in last year’s survey, helping to explain why the Big Two continue to take in over half of net ETF flows year in and year out despite the proliferation of low-cost products from rival asset managers. Those two factors were much less important outside the US, explaining some of the challenges BlackRock and Vanguard have faced in capturing overseas markets."

Another development in the industry is the rise of custom indexing and that took another step forward this week in the US with Interactive Brokers launching custom indexing for RIAs, described as ‘a new direct indexing solution that enables RIAs to personalise client portfolios’.

The firm writes that custom indexing allows RIAs to create custom portfolios for their clients that directly hold the underlying securities of an index rather than purchasing a traditional index fund.

"This approach provides several benefits, including the ability to customise portfolios to align with specific investment objectives, as well as include or exclude specific stocks based on ESG preferences and other factors. Unlike traditional ETF investing, custom indexing does not have an expense ratio and comes with low minimums, allowing RIAs to customise and personalise investing to their clients’ needs," the firm says.

We also have an interview with Jean-François Bay, Managing Director Quantalys France Harvest Group, who explained to Paris-based Romain Thomas that the launch of the ETF Management Observatory with BNP Paribas Asset Management was designed in order to provide reliable, independent and in-depth data on the ETF market at European level. "For an independent analysis company such as Quantalys, it is necessary to offer to our clients dedicated ETF research to help them to better understand market trends," Bay says.

Voting is now open in our inaugural ETF Express Canada awards. 

To place your votes on your favourite service providers and ETP issuers, please follow this link.

Beverly Chandler, Managing Editor

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