Category Archives: Uncategorized

How To Find An Advisor Who Focuses On ETFs

Given the explosive growth in exchange traded funds with their vast investment offerings, low cost and tax-efficiency, chances are your financial advisor has at least considered using them in part or all of your portfolio.

But what if he or she doesn’t? It might be time to ask them why not. And if the answer is unsatisfactory, look for one that does.

ETFs might not be right for every part of your portfolio, but they could be a good fit in various areas.

For example, does your investment plan call for some exposure to the broad stock market? There are many ETFs that track the S&P 500 and broader indexes offered by the big ETF providers, BlackRock’s iShares, State Street Global Advisors’ SPDRs and Vanguard. If your advisor chooses a more expensive way to gain exposure to the stock market, there might be a reason, but there should be an explanation.

If you’re unsatisfied with the answer or are just beginning your search for an advisor, where do you start?

You can ask friends and family for referrals. You should also check out the National Association of Personal Financial Advisors, or NAPFA. It’s a professional association of fee-only financial advisors that started in 1983. They have a registry of advisors and chances are there are several near you.

If you have at least $500,000 to invest, you can also try Schwab Advisor Network. Other brokerages can also help refer you to financial advisors.

But if you start your conversation with an advisor by asking if he or she invests in ETFs, be prepared to get a question or two thrown back at you before you get an full answer. That’s because advisors are trained to look at your investment goals and risk tolerance before choosing investments that fit your needs.

Nik Schuurmans, the founder of Pure Portfolios, a registered investment advisor (RIA) in Portland, Ore., says to get an ETF-focused advisor you need to go with an independent RIA who doesn’t have a relationship with a mutual fund family, so he or she doesn’t have to push mutual funds. He says if you’re willing to embrace technology you can also try a robo-advisor. NerdWallet’s top 2017 robo-advisor picks include Betterment, Wealthfront, Wealthsimple, WiseBanyan, Charles Schwab and Fidelity Go.

“I don’t believe a consumer should use ETFs vs. other products as the criteria for using advisors,” said Matthew S. Clement, president of Emerald Retirement Planning Group in Stony Point, N.Y., an RIA that uses ETFs in its client portfolios. “I don’t mean it shouldn’t be part of the conversation. But it would be misguided to be the main reason. And it misses the fundamental issues for some hiring an advisor in the first place.”

Clement said the fundamental question when choosing one advisor over another is: “What do I expect this advisor to do for me?”

“There’s no book with the title ‘Advisors That Use Only ETFs,’ ” said Steve Dunn, executive director of ETF Securities, a specialist commodity exchange traded product provider. “But, it’s becoming much more common to find them. You have to find an advisor with a consistent philosophy of what you expect.”

Dunn suggests a group of advisors called the Zero Alpha Group, or ZAG.

“Their website lists firms that buy into this passive low-cost alternative.”

But the best known resource is a site called the Paladin Research & Registry. Started in 2003, the site is run by founder Jack Waymire, the author of “Who’s Watching Your Money?: The 17 Paladin Principles for Selecting a Financial Advisor.”

Advisors pay a membership fee to join the registry, which then vets them before they are listed in the registry.

Paladin reviews and documents financial advisors’ credentials, education, experience, ethics, business practices, services, certifications, associations and continuing education.

“Most advisors present themselves in the form of sales pitches,” said Waymire. “We require transparency. If an advisor is telling people he’s an expert, where did that expertise come from?”

It looks at advisors’ fiduciary status, license, registration and compliance record at

The registry lists what services advisors provide, how they are compensated, and how they communicate with clients. And for our person looking for an ETF-focused advisor, it lists a manager’s strategy, whether passive or active.

“Passive and ETFs are virtually synonymous,” said Waymire.

After checking the data, it rates the advisor’s quality. An advisor needs to achieve a specific score to get into the registry.

Waymire said investors could query Paladin for another level of detail such as “I’m looking for an advisor that uses passive management with ETFs.” He said if they want to do research that goes one level deeper they need to go the advisor’s website. He also recommends that investors check out the advisor on finra’s brokercheck.

This was originally published in Investor’s Business Daily.


Money Managers Lure Millennials With Low Minimums, Live Advice

The traditional financial advisor rarely takes on new clients with a nest egg smaller than $100,000.

But the financial advisory industry is coming up against two large speed bumps that could spark a paradigm shift: the rise of the robo-advisor and the fact that the second half of the millennial generation is entering the workforce and starting to invest.

This has led one registered investment advisor to rethink its strategy for acquiring clients. M&R Capital Management is a 24-year-old firm with $500 million under management. The New York-based RIA — which manages money for individuals, institutions and charities — typically requires $250,000 to open a separately managed account (SMA). Its average SMA rose 13.05% in the past year and for the past three and five years returned an average annual 2.89% and 6.26% respectively, M&R says.

However, the firm’s members realized their growth strategy needed to focus on the millennial generation. With many millennials still in their early to mid-20s, few have the nest egg to open an SMA. Most don’t even have savings.

But the few sophisticated enough to invest are looking at the same place where they do their shopping and banking — the computer — and opening accounts with robo-advisors.

So M&R Capital decided to lower its account minimum. It created Prime Funds, a set of ETF-based model portfolios in which people could open an account with as little as $500.

“This is our way to compete with the robo-advisor,” said Paul DeSisto, director and senior portfolio manager at M&R. “The idea was to get young workers. People who don’t have much money to invest and get them invested right away with some safety and growth.”

DeSisto said the idea is to make them clients when they are small investors, help them grow large portfolios, then 15 or 20 years later move them into an SMA.

“We feel that people still want to talk to somebody,” said DeSisto. “They can call at any time and have access to the portfolio managers.”

M&R is able to accept such small accounts by keeping costs low. Prime Funds clients only have a choice of three portfolios. M&R uses the Pershing FundVest ETF platform, which lets M&R trade ETFs commission-free. The clients can’t trade ETFs on their own. M&R charges each account an annual fee of 1%. That’s on top of the fees that the ETFs charge, which range from 0.15% to 0.57% of assets a year.

The three portfolios currently available are: growth, value, and equity income.

The growth portfolio consists of a 42.5% allocation of PowerShares Dynamic Large Cap Growth Portfolio (PWB), 15% SPDR S&P 400 Mid Cap Growth (MDYG), 32.5% SPDR S&P 600 Small Cap Growth (SLYG), and 10% PowerShares S&P International Developed Quality Portfolio (IDHQ).

The value portfolio consists of PowerShares Dynamic Large Cap Value Portfolio (PWV), Oppenheimer Mid Cap Revenue ETF (RWK), SPDR S&P 600 Small Cap Value (SLYV), and IDHQ.

The high-distribution equity-income portfolio is comprised of PowerShares S&P 500 High Dividend Low Volatility Portfolio (SPHD), SPDR S&P 400 Mid Cap Value (MDYV), PowerShares S&P SmallCap Low Volatility Portfolio (XSLV), and IDHQ.

The funds have been up and running since July 31. Through the end of September, the growth portfolio has a return of 6.1% and $95,000 in assets. The others don’t have assets yet.

While it’s not a full-blown trend, M&R isn’t alone in taking on clients with small accounts. Some, like Jeremy Torgerson, the founder of nVest Advisors, an RIA in Denver, has been taking on small accounts for two years because he sees how the robo-advisor technology is overrunning the industry. He offers his clients five ETF-based model portfolios.

“I’ve structured my practice to be a touch of robo and a touch of human to hold their hands,” said Torgerson. “If you get these people on the ground floor and be there for them, you will have a lifelong client.”

Hunter von Unschuld, the founder of Fractal Profile Wealth Management, an RIA in Albuquerque, N.M., retired as an attorney in 2013 and has been managing money since. He won’t turn anyone away — and offers eight ETF-based portfolios.

“We take small accounts because it’s my belief that everyone that needs help with their finances and retirement planning should be able to get help no matter their account size,” he said.

This was originally published in Investor’s Business Daily.

Investors Vote With Their Feet Before Scottish Poll

As Scotland votes on its independence Thursday, the fate of the U.K. remains too close to call.

But ETF investors have been voting all month — with their money. Of the eight U.S.-listed ETFs specific to the U.K., three of the largest have seen large net cash outflow, while the remaining five have seen inflow match outflow.

IShares MSCI United Kingdom ETF (EWU) — the largest U.K.-related ETF, with a market cap of $4.13 billion — saw outflow of $40.5 million in August, says Morningstar. The fund tracks about 85% of the U.K. stock market. Its top three holdings are HSBC Holdings at 7.1% of assets, Royal Dutch Shell at 5.3% and BP at 4.9%.

The fund has tumbled 9% from its June high.

IShares MSCI United Kingdom Small-Cap ETF (EWUS) saw outflow of $10.2 million for the month ended Sept. 15, nearly a quarter of its total assets, according to research firm XTF. With its price declining 2% the past month, the fund has sunk 9% from its June high.

Even though investors have known about the vote all year, recent polls showing that the Scots favor leaving Great Britain have flamed uncertainty. And investors are famous for hating uncertainty.

“The vote is most important for the U.K., but Scottish independence would have broader significance as well, particularly for the rest of Europe,” wrote Russ Koesterich, global chief investment strategist for BlackRock’s iShares business, in a recent note. “At the very least, sterling and other U.K. assets would likely come under additional pressure. In addition, given that Scotland is typically more pro-European Union than the rest of the U.K., a departure could raise the odds of an eventual U.K. exit from the EU, which would only add to uncertainty in the region.”

Should the Scots vote “Yes,” the biggest losers will be the British pound sterling and Prime Minister David Cameron, who may be forced to call a new election.

CurrencyShares British Pound Sterling Trust (FXB), which tracks the performance of the pound against the dollar, saw the second most outflow over the past 30 days, $16.3 million, leaving it with $63.8 million in assets, according to XTF. FXB’s price fell 2% the past month and is down 5% from July, when the pound hit a multiyear high.

“If they vote ‘Yes,’ people might flee out of sterling because the government might be toppled,” said Axel Merk, president and chief investment officer of Merk Investments in Palo Alto, Calif. “But I’ve been buying sterling because I believe there will be a relief rally when the Scots say ‘No.'”

FXB has rallied 2% in the past seven sessions.

Scotland accounts for about 10% of Britain’s gross domestic product, but a “Yes” vote will create a lot of uncertainty over the North Sea oil assets, says Merk. People who don’t want uncertainty will take their capital from Edinburgh to London, he says.

Bucking the trend, Deutsche X-trackers MSCI United Kingdom Hedged Equity ETF (DBUK) is up 5% in the past month. It provides exposure to the U.K. stock market while using a hedging strategy to benefit from weakness in the pound.

For the full story go to Investor’s Business Daily.

ETF Assets Grew 25% in 2013 Says ICI

The U.S. exchange-traded-fund industry added a net of 99 new ETFs, or growth of 8.2%, for a total of 1,293 funds, according to the Investment Company Institute.

The combined assets of the nation’s ETFs grew 1.9% in December and 25.2% for all of 2013 to end the year at $1.675 trillion, reported the Institute, the trade group for the mutual fund and ETF industries better known as the ICI.

Ironically, while saw fixed income saw the greatest growth with 36 new funds, or 17.8%, it posted the smallest asset growth, just 1%, to $245.9 billion. No doubt, this is a result of the massive outflows as bond investors reposition their portfolios in anticipation of the Federal Reserve reducing its bond purchasing as part of the Quantitative Easing program.

Meanwhile, even though the hybrid category added just one new fund in 2013 for a total of 14, it posted the greatest asset growth, 121%, to $1.45 billion.

The total number of domestic equity funds, which includes commodity ETFs, grew 4.9% to 603. Domestic equity assets jumped 35% to $1.028 trillion. Global and international equity funds grew 8.4% to 438, while assets under management jumped 21.3% to $398.85 billion.

During December, the value of all ETF shares issued, or net issuance, exceeded that of shares redeemed by $19.97 billion, a 39% drop from the net issuance of $32.58 billion in December 2012. Net issuance for all of 2013 was $179.87 billion, a 3% drop from 2012’s net issuance $185.39 billion.

SPDR Turns 20 Years Old

It was 20 years ago today, State Street Global launched the ETF. (Sung to the tune of
Sgt. Pepper’s Lonely Hearts Club Band.)

On January 29, 1993, the first exchange traded fund, called the Standard & Poor’s Depositary Receipt, began trading on the American Stock Exchange. With the abbreviation SPDR, the product was immediately nicknamed “the spider.” The Amex created the product, then called an “index tracking stock,” with State Street’s logistical help, as a way to increase trading volumes on the dying exchange. The first day the SPDR traded one million shares. Not a bad total for that time period. However, a month later trading volumes had shrunk to 19,500 a day and within three months volumes had fallen so low the Amex considered delisting it.

The Amex is now dead and gone, but its legacy lives on as a huge success and flagship of a revolution in investing. Renamed the SPDR S&P 500 (SPY), the Spider is now the largest fund of any kind in the world, with net assets of $123 billion and average daily volume of 144 million shares.

State Street Global Advisors celebrated the 20th anniversary of its product Tuesday with a panel discussion about the present state and future of the industry it helped start.

New Bond ETFs Offer More Yield With Less Risk

State Street Global Advisors launched two new ETFs today on the NYSE Arca that seek to pay a yield higher than most investment grade bonds with less expected risk than junk bonds or debt from emerging markets.

The SPDR BofA Merrill Lynch Crossover Corporate Bond ETF (XOVR) tracks the BofA Merrill Lynch US Diversified Crossover Corporate Index. According to State Street, “ ‘Crossover’ corporate debt generally means corporate debt rated at levels where the lower end of investment-grade debt and the higher end of high-yield, or junk, debt meet. Qualifying securities must be rated BBB1 through BB3 inclusive — based on an average rating of Moody’s Investors Service, Standard & Poor’s and Fitch — have a fixed income coupon schedule, have at least one year remaining to final maturity, and a minimum amount of outstanding of issuance of $250 million or more. Index constituents are segmented into two groups: those rated between BBB1 and BBB3, inclusive, and those rated between BB1 and BB3, inclusive. Within these two groups, issues are capitalization-weighted and each group is assigned a 50% weight in the overall index – with a 2% cap on each issuer.” As of May 31, the index held approximately 3029 securities. The expense ratio is 0.30%.

“Featuring potentially higher yields than most investment grade bonds and potentially less credit risk than most high yield issues, demand for crossover bonds is growing among financial advisors and investors during this extended low-yield environment,” said James Ross, senior managing director and global head of SPDR Exchange Traded Funds in a written statement. “With the launch of the SPDR BofA Merrill Lynch Crossover Corporate Bond ETF, precise, cost-efficient access to this asset class is within reach for investors seeking exposure that spans both investment grade and high-yield bonds.”

The SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF (EMCD) tracks the BofA Merrill Lynch Emerging Markets Large Cap Senior Corporate Index, which designed to measure the performance of U.S. dollar-denominated emerging market corporate senior and secured debt publicly issued in the U.S. domestic market and the Eurobond market. To qualify for inclusion, an issuer must have primary risk exposure to a country other than a member of the G10 (Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, the United Kingdom, and the United States), a Western European country, or a territory of the U.S.

Individual securities of qualifying issuers must be denominated in U.S. dollars, be senior or secured debt, have at least one year remaining to final maturity, a fixed coupon and $500 million or more in outstanding face value. As of May 31, approximately 454 securities were included in the index. The expense ratio is 0.50%.

“The SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF provides investors with an opportunity to tap into the growth potential of emerging markets while minimizing exposure to emerging market currencies,” said Ross. “As fixed-income portfolio diversification becomes a higher priority for investors, interest in emerging market bond exposure is increasing.”

Down 50% in 2 Days, TVIX Could Fall More Monday

After the VelocityShares Daily 2x Long VIX Short-Term ETN (TVIX) plunged 30% in Thursday, Credit Suisse, the sponsor of the controversial fund, reopened share issuance on a “limited basis.” The ETF proceed to fall again Friday for a 50% drop over two days.

The Swiss banking giant was blamed for the two-day decline, by Benzinga, because it had temporarily halting new issuance of TVIX shares last month.

“Beginning March 23, 2012, Credit Suisse may from time to time issue the ETNs into inventory of its affiliates to make the ETNs available for lending at or about rates that prevailed prior to the temporary suspension of issuances of the ETNs. Also, beginning as soon as March 28, 2012, Credit Suisse may issue additional ETNs from time to time to be sold solely to authorized market makers,” according to a written statement issued by the bank after Thursday’s close.

Benzinga says “the halt in TVIX share creations may have caused a massive spike in the ETN’s net asset value. The elevated NAV and ensuing plunge in TVIX indicates that, simply put, traders discovered said premium and exploited it.”

TVIX’s slide continued in after-hours trading where the ETN lost almost another 12% and was found at $9 at 8:30PM Eastern Time. That’s by far the the lowest price TVIX has ever traded at.

On Friday, the shares fell 30% to $7.16 on volume of 29.3 million shares, more than twice its daily average volume. That’s 62% of the 46.7 million shares outstanding. And with the shares still 7% above their indicative value of $6.70, according to VelocityShares, the ETN could see another decline on Monday.

ETF Reading List:

China’s PMI Data Could Hinder, Help These ETFs (HAO, FXI, MCHI) (Benzinga)

Happy Water Day? Maybe For Water ETFs (PIO, PHO, CGW) (Benzinga)

Yorkville High Income MLP ETF’s Yield 8.5% On Average (

Seriously? Credit Suisse to Allow New TVIX Creations (TVIX, CS) (Benzinga)

Avoid These ETFs For Now (FXI, TVIX, GDXJ) (Benzinga)