A casual observer might easily look at the $10 trillion exchange-traded fund industry as it wades into its fourth decade of existence and assume most of the potential innovation and creativity is already represented among the 4,000-plus ETFs trading in the U.S.
All it takes is a glance at recent developments across the industry to realize the change is constant, unavoidable and not something to be ignored by investors and financial advisors.
Exchange-traded funds have come a long way since the SPDR S&P 500 ETF Trust (SPY) debuted as the first ETF in January 1993. But the creativity seems to have ramped up a few notches over the past few years with the advent of single-stock ETFs that let traders leverage long or make short bets on individual companies through ETFs.
Buffer ETFs are another category that have been embraced by financial advisors and their clients in or near retirement. Buffer and defined outcome ETFs are sometimes referred to as “boomer candy” for their growing appeal among an investor set looking to take some risk off the table while staying in the market.
And let’s not overlook the impact of cryptocurrencies on the ETF space, most famously represented by the iShares Bitcoin Trust (IBIT) as the most successful ETF start ever. It has generated about $41 billion in inflows.
Add to that the recent move by Vanguard Group to cut the expense ratios on more than half of its 88 ETFs and you’ve got an old fee-pressure strategy representing yet another wrinkle in the ETF space.
At least one analysis of the fee cuts by the renowned low-cost provider is connecting the news to a sudden stock price decline by BlackRock Inc. (BLK).
Shares of the world’s largest asset manager have dropped by about 9% since the Vanguard price cuts were announced last month.
While it's difficult to draw a direct line between the fee cuts and BlackRock’s stock price, it would be hard to imagine Vanguard’s move is not already rippling through corporate boardrooms at ETF issuers.
It is against that backdrop that the College for Financial Planning, in partnership with BlackRock, has started the ETFs & Portfolio Construction Certificate Program for financial advisors.
With ETFs representing the most popular investment vehicle among financial advisors and the ETF space pushing resources toward advisors with increasing imagination and enthusiasm, it only makes sense that such a program would emerge.
ETFs, the most user-friendly investment vehicle, are getting more complex by the day, and financial advisors must keep up.
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