AIIM Financial Services is looking at ditching all of its clients’ direct stock holdings and replaced them with six to seven ETFs.
It is a radical move, we believe the change not only delivers better outcomes for our clients, but also creates a more efficient business model that frees us up to focus on higher-value advice.
I see managing a portfolio as a very small part of what I do as a strategy-focused planner. Moving to ETF-based portfolios has freed up more of my time to concentrate on strategies that provide more value to our clients.
Advisers are adopting ETFs for these reasons: cost-effectiveness, transparency, flexibility of trading and tax efficiency.
We estimate clients will save about 1 per cent a year in brokerage fees. Creating a fully developed portfolio across all asset classes using direct securities required an account of at least $300,000. “With ETFs, because transaction costs are lower, you can do that for $20,000.”
A basket of ETFs also removes stock selection risk. It’s all asset allocation.
ETFs can also simply be used to target select tactical opportunities – such as gold, currency and bear strategies – as part of the overall blended portfolio design.
AIIM can’t just hang our hat on the investment piece. We need to provide much broader and deeper value than that.
At recent client meetings. We spend just five minutes on portfolio performance. The rest of the meeting focused on identifying strategies for the client.
I felt I provided much better value to the client.
Greater use of ETFs is definitely a growing trend. A move to 100 per cent ETFs is not happening on masse, but people are moving down that spectrum, Vanguard says.