Top 5 reasons to consider converting your SMA to an ETF

Converting an SMA to an ETF can provide your clients with the right strategy, more favorable tax treatment, and an easy vehicle to access it.

Exchange Traded Concepts works to help advisers with significant AUM in separately managed accounts convert their strategies to ETFs. Converting an SMA to an ETF can provide your clients with the right strategy, more favorable tax treatment, and an easy vehicle to access it. ETFs also create operational efficiency that enables advisers to focus on business growth.

Top 5 reasons to consider converting your SMA to an ETF
 

1. Tax Efficiency
   The creation/redemption mechanism is an attractive quality of an ETF, giving more transparency and often favorable tax benefits.
    
2. One-Trade Option
   Advisors have a one-trade option to execute their investment strategy – buying the ETF. There’s no need to purchase underlying securities in the strategy since all the trading activity happens within the ETF.
    
3. Diversification/Liquidity
   ETFs are a great way to give your clients exposure to a wider range of investment options. Less liquid asset classes may not be readily available to individual investors, however, can be accessed with an ETF.
    
4. Market Strategy to a Wider Audience
   Since ETFs are publicly-traded securities that trade on an exchange, your strategy has more exposure to a wider audience. ETFs are also attractive to clients who don’t meet the minimum assets required for SMAs.
    
5. Lower Costs
   ETFs are easier to trade, which results in lower operating expenses and reduced costs. This gives you the ability to expand your client base by offering a low-cost solution to fee-sensitive clients.

With only one portfolio to manage, the tax efficiencies through in-kind creation/redemptions, and the ability to use custom baskets, it’s no surprise ETFs may be attractive to advisers with a large base of SMA assets.

Some clients may prefer to keep their assets in an SMA, own the securities in their portfolio directly rather than shares of an ETF, or they may require customization such as restricting certain stocks or industries.
 

If you are considering whether an SMA to ETF conversion is right for your business, contact us to talk about what it’s like for ETC to run your strategy.

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