ETF providers have been trying to get on advisors’ radars with free offerings like portfolio tools and analysis.
WisdomTree, the New York-based ETF provider that launched in Canada last year, is now trying to one-up its competitors with tailored consulting services to help advisors grow their businesses and even migrate to fee-based practices.
Kurt MacAlpine, executive vice-president and head of global distribution for the firm, tells Advisor that WisdomTree is regularly asking advisors what their biggest challenges are, and tweaking its services based on their needs. He says he wants the suite of services to be so complete that, when advisors have questions about their practice or their business, they call WisdomTree first.
“Growing their client base is one of the single hardest things they’ll do. Most advisors typically don’t need more products,” MacAlpine says. “[It’s] really partnering with them to address some of the biggest issues they’re facing.”
By offering portfolio tools, analysis and engaging with advisors, ETF providers are gaining insight into advisors’ portfolio needs, and at the same time helping advisors understand the role of ETFs in a portfolio.
Pat Chiefalo, head of iShares Canadian products at BlackRock Asset Management, recently told Advisor that once or twice per year, he crosses the country to meet with advisors. “I love hearing about how they’re crafting and constructing their portfolios. More recently, that’s becoming a bigger part of the conversation,” he says. “For anyone that’ll have me in their office, I’m more than happy to make an appearance.”
The services by ETF firms are a testament to the importance of advisors in the distribution of investment products. ETF providers benefit from advisors being in all corners of the country. In their view, if advisors survive as fee-based in a post-embedded commission world, even better.
WisdomTree has been developing its Canadian services, already on offer in the U.S., since launching north of the border last year. The advisor services range from workshops and information sessions on succession planning, client engagement, CRM2 and regulatory, retirement, and portfolio construction. It also offers client events and will connect advisors with an expert from the MIT AgeLab.
While demand is highest for WisdomTree’s portfolio construction service—covering fees, risk, performance, and portfolio stress testing—MacAlpine says many advisors are looking at how to change their business model as the CRM2 fee transparency rules, and now a possible commissions ban, enter the foreground.
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“A lot of advisors recognize that their business might be obsolete, or vulnerable if you will, given CRM2,” MacAlpine says. “Advisors are looking to transform their businesses from [mutual] funds to ETFs. It’s pretty hard to do it.”
He adds: “We do workshops with advisors to help them understand that, as regulations play out, here’s typically where you’re vulnerable, here’s some strategies that we’ve seen other people live through, either successfully or unsuccessfully, in terms of how they’ve migrated their business.”
WisdomTree is encouraging advisors become fee-based as a way grow their client base and differentiate their practice within the market—and its offering services to help make the transition. It suggests advisors can build successful businesses on client fees and transaction commissions.
MacAlpine says advisors also show high demand for services to help with client engagement, and more consistently and effectively communicate with clients to deal with behavioural finance. He adds: “I think, as a result, our products perform well. As long as we get an at-bat, we feel like we’re going to benefit.”
Yves Rebetez, editor of online news service ETF Insights, says ETF providers have grown into firms wanting to “be everything to everybody.” It’s partly a way for ETF providers to gain an audience with advisors as the factor-investing ETF market continues to boom—with the number of indexes surpassing the number of U.S. stocks earlier this year.
“They recognize that because there are so many ETF solutions, it can become kind of crowded and confusing for advisors,” Rebetez says. “You have a chance to potentially see them consider your solutions.”
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