How ETFs Can Round Out Your Product Offerings

June 05, 2024 EDT

Explore the benefits of integrating ETFs into your firm’s product offerings. Learn how they can help grow your client base, showcase your proprietary models, and serve as a valuable cross-selling tool.

Have you considered adding exchange-traded funds (ETFs) to your firm's product offerings?

ETFs have become increasingly popular investment vehicles due to their versatility and wide-ranging appeal. By incorporating ETFs into your firm's product offering, you can attract a broader range of clients and enhance the firm’s marketability.

ETFs as Cross-Selling Tools

ETFs offer exposure to various asset classes, sectors, and investment strategies, which can appeal to new and existing clients. With potentially lower costs and higher liquidity compared to other investment vehicles, ETFs are a compelling option for clients seeking portfolio diversification. Offering ETFs alongside your traditional investment vehicles allows your firm to expand its reach and cater to your client's evolving needs.

Lowering Entry Barriers

Compared to separately managed accounts (SMAs), with minimum investments typically starting at about $100,000 or more, ETFs have significantly lower barriers to entry since the typical investment minimum is the ETFs market price per share. This allows clients who may not meet the higher minimum investment requirements of traditional products to gain exposure to a variety of investment strategies that may have previously been out of reach.

The lower entry point of ETFs also makes them an ideal tool for asset managers looking to implement asset allocation strategies for their clients. With ETFs, you can easily construct diversified portfolios that span multiple asset classes and sectors without the need for large initial investments. Clients can even transition from SMAs and mutual funds to ETFs, possibly enhancing tax efficiency.

Showcase Your Expertise

One key benefit of using ETFs to showcase your proprietary models is the increased visibility and accessibility they provide. Unlike privately managed accounts or hedge funds, which may have limited transparency, ETFs are publicly traded and highly transparent. This allows potential clients to evaluate the performance of a fund, clearly demonstrating your firm's investment prowess. The public nature of ETFs, and the ability to heavily market them, may help grow many aspects of your current business.

Additionally, packaging your proprietary models into ETFs allows you to tap into the growing demand for innovative and differentiated investment vehicles. Investors continue to seek strategies that go beyond traditional market cap-weighted indexing, and proprietary ETFs can offer a compelling alternative.

Strategic Benefits for Institutional Clients

An ETF fund family can bring significant benefits for institutional clients such as:

Cost-Effectiveness: With lower expense ratios compared to mutual funds or SMAs, ETFs can provide significant cost savings for large institutional portfolios.
Efficient Access to Market Segments: Gaining exposure to specific market segments or investment strategies through ETFs can simplify the investment process and allow for greater flexibility overall.
Revenue Growth Potential: The potential for Increased assets under management from institutional clients can generate higher revenue for your firm.
Deepening Client Relationships: Offering ETFs positions your firm as a one-stop shop for investment needs, leading to increased client loyalty and the potential for more assets under management.
Tax Efficiency: ETFs can offer unique tax benefits compared to mutual funds, potentially enhancing after-tax returns for institutional clients.
Publicity and Branding: Creating your own ETF is your firm's ethos encapsulated in a tradeable format for all to see.

Ready to grow your strategy?

In today's competitive financial landscape, incorporating ETFs into your product offering can provide the edge you need to reach the next level for your firm.

ETFs are versatile, accessible, and cost-effective, so you can showcase your expertise and round out your product offering while attracting a wider range of clients.