More and more financial advisers are turning to exchange-traded funds to build the core of their client’s portfolios, The Wall Street Journal reports.
Once satellite tools, the proliferation of ETFs and companies that sponsor them has made using them as the backbone of their clients’ accounts far simpler.
One reason ETFs are attractive to advisers is that during market downturns, their trade-all-day agility helps control losses.
The fact that they require no minimum investments, have low expenses and offer tax advantages adds to their appeal, advisers said.
Their diversification saves advisers form having to choose between equally attractive stocks, also, said Michael Jones, chief investment officer at Wachovia Securities.
Powershares, XTF Asset Management, and scores of other companies looking to get in on the ETF boom have offered model products for advisers to offer their clients. Ted Feight, a financial planner in Shanty Creek, Mich., said that ETFs account for 95% of the products he uses to manage his $2 billion business. He uses sectors and international funds to gain access to splices of the market mutual funds can’t get at, he said.
In the future, he said, he sees the strength of ETFs as the Achilles heel of the mutual fund industry, bringing with them the potential to weed out weak contenders.
“If I was a bad [mutual fund] manager,” Feight said, “I would be quaking in my boots.”
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.