Speaker 1: Welcome the trillions. I'm Joel Webber and I'm Eric bel
Speaker 1: Tunis Eric, do you remember the before times? Because we
Speaker 1: had an interview back in March with someone that we
Speaker 1: never aired and we, you know, dusted it off for
Speaker 1: this week's episode and I'm excited to revisit it. They
Speaker 1: were such they were it was like days of innocence.
Speaker 1: I was so much younger back then in early March.
Speaker 1: I miss you. I miss you. I really do. It
Speaker 1: would be normal again someday. Uh So. Our guest is
Speaker 1: Tim Clift of Investment, and we found him through actually
Speaker 1: Morgan Barna, who's in Bloomberg Intelligence and is an analyst
Speaker 1: with you, and Morgan flagged him because he's got this
Speaker 1: huge team of research analysts who helped him have this
Speaker 1: platform that interfaces with more than a hundred thousand advisers,
Speaker 1: which I thought was really interesting because we always talking
Speaker 1: about products and e t f s, but we don't
Speaker 1: talk about platforms that much. Yeah. I think for somebody
Speaker 1: who isn't in the business, a good way to put
Speaker 1: it would be like the platform is sort of like
Speaker 1: the costco or Whole Foods for advisors. So if you
Speaker 1: have an advisor that you use. They especially one that
Speaker 1: doesn't that has broken away from the sort of wire
Speaker 1: houses like the merrals or ubs is and is on
Speaker 1: their own independent. They would use an invest net to
Speaker 1: shop for individual et f s, funds or packages of
Speaker 1: them um in a sort of wholesale manner. So what's
Speaker 1: interesting to me about this conversation in regards to what's
Speaker 1: going on now and the market is we've seen more
Speaker 1: and more these the way we watch flows all the time,
Speaker 1: and we're seeing more and more that models are impacting
Speaker 1: the flows. You can tell when a model says, you
Speaker 1: know what, we're shifting out of you know, inflation protective
Speaker 1: securities into corporates or out of equities and into bonds.
Speaker 1: You can see it in the flows. And so more
Speaker 1: and more these e t f s make it into
Speaker 1: these models, which are put on the shelf at these
Speaker 1: proverbial costco or whole foods. The more the flows are
Speaker 1: impacted by what the models do. And the models can
Speaker 1: be tactical trading a lot or strategic which don't move
Speaker 1: all that much. And this guy tim Is basically sits
Speaker 1: rate in the middle. He's like the gatekeeper of the
Speaker 1: funds that get on He also works on making the models,
Speaker 1: and there's outside people who make the models. So it's
Speaker 1: a little inside baseball, but I think it's a really
Speaker 1: interesting um look into how the sort of intermediary channel
Speaker 1: of e t F flows and investing works. So just
Speaker 1: to give you some scale, you know, invest Net, this
Speaker 1: company has about seventy dollars in e t F s's
Speaker 1: that's about two of all e t F sets, so
Speaker 1: it's not huge, but it's sizeable. But there they have
Speaker 1: growth year over year. And what's also interesting is that
Speaker 1: in e t F models though, could be something like
Speaker 1: two hundred to three hundred billions, so getting closer to
Speaker 1: so and I think that's the chunk we're really going
Speaker 1: to focus on today. But the vest Net is, like
Speaker 1: I said, a portion of that chunk in terms of
Speaker 1: how they fit into the bigger picture. So again Tim
Speaker 1: Cleft of the vest Net. This was recorded in mid
Speaker 1: March before our office went on lockdown, so it sounds
Speaker 1: especially great because we're not all in closets. And special
Speaker 1: thanks to Morgan Barnett for helping make this episode happen.
Speaker 1: By the way, that's funny you bring that up, because
Speaker 1: remember we wondered which of those e t F s
Speaker 1: that we pitched in the e t F Tank episode
Speaker 1: about ten of us all pitched products we thought should exist,
Speaker 1: and we wondered who would be the first to market.
Speaker 1: And Morgan's one She pitched a online betting e t
Speaker 1: F and it is now a reality b e t
Speaker 1: Z and it's an instant hit. It's already got six
Speaker 1: and seven million dollars came out of the gate pretty strong.
Speaker 1: So congratulations to her. Even though I won in that
Speaker 1: competition with x mon the x Monday's e t F,
Speaker 1: she won the real investing with Investment Damn. Welcome to Trallians.
Speaker 1: Thanks for having me. So what do you do at investment?
Speaker 1: I wear a lot of different hats, but my primary
Speaker 1: responsibility is for research and portfolio management for the organization.
Speaker 1: So we have a team of analysts that do research
Speaker 1: on mutual funds ETFs, all sorts of different investment products
Speaker 1: and then make recommendations to financial advisors UM and to
Speaker 1: our own portfolio managers that will build model portfolios. Eric
Speaker 1: thinks your whole foods, how do you describe yourself? I
Speaker 1: think that's a great description. You know, you know, we
Speaker 1: could be a thank you. So the Amazon Amazon, but
Speaker 1: we we are a big open architecture platform, so we
Speaker 1: don't We don't necessarily start from a curation standpoint. We
Speaker 1: open our doors to just about everybody. But we do
Speaker 1: have teams in how that help advisors and organizations get
Speaker 1: that list smaller. And I think that the real important
Speaker 1: thing for people here to understand who might be retail
Speaker 1: investors themselves, is advisors wealth managers. They don't necessarily do
Speaker 1: it all themselves. They will outsource a lot of things.
Speaker 1: So just talk to us about the shoppers at your
Speaker 1: quote platform. The people who use them are advisors. What
Speaker 1: are they getting from you? And and how are et
Speaker 1: s involved. Yeah, Historically advisors a lot of their practice
Speaker 1: was built around them building their own models, and I
Speaker 1: think over time they've understood or have figured out that
Speaker 1: that's maybe not the best use of their time, that
Speaker 1: they really need to spend more time with their clients
Speaker 1: putting together financial plans. Who can I pay to make
Speaker 1: these problems go away? Not you, exactly exactly. So you
Speaker 1: know the advisors now are saying, well, maybe it makes
Speaker 1: sense for this segment of my business just to go
Speaker 1: into model portfolios. They all have very different appetite for risk,
Speaker 1: different time horizons. Within the model structure, you can actually
Speaker 1: fit a lot of different people into a limited number
Speaker 1: of model portfolios that will make sense for those. Okay,
Speaker 1: so model portfolio, model structures, what does that? What was
Speaker 1: any of that mean? So think of a model portfolio
Speaker 1: as a selection of mutual funds or e t f s.
Speaker 1: No ETFs are the ones that are growing the fastest
Speaker 1: um with different risk tolerances. So maybe you have three, five,
Speaker 1: ten different mutual funds or ETFs in the portfolio, and
Speaker 1: those will change over time as the economy changes or
Speaker 1: the direction of the goals of the client change. But
Speaker 1: it's a it's a set portfolio of of these underlying
Speaker 1: security and and are these tailored for me as an
Speaker 1: individual or are they more off the shelf products? So
Speaker 1: they start off relatively off the shelf. So there may
Speaker 1: be seven or ten um in a risk spectrum, so
Speaker 1: from very conservative to very aggressive, and there may be
Speaker 1: tax efficient versions of those. But there's also tools you
Speaker 1: can set on top of these model portfolio so you
Speaker 1: could say, well, I want to have an e s
Speaker 1: G or an impact component to it, or I want
Speaker 1: to add an income infusion to it, so you can
Speaker 1: do some customization to these, but by and large they
Speaker 1: start off at least as as um um structured structured
Speaker 1: individual portfolios. Most people out there know the sixty equity bonds,
Speaker 1: and you could do that with two ets. Now I'm
Speaker 1: assuming you know if you were described one of these portfolios,
Speaker 1: I know you can't say tickers. Um, we'll we'll say
Speaker 1: them for you if we need too. But go through
Speaker 1: what one might look like? Is it you know fifty
Speaker 1: thirty times? Like, what's going on here? What's an example
Speaker 1: of one? What's the compositions somebody? What would you put
Speaker 1: jole in? Basically? Yeah, so they're there are very simple
Speaker 1: ones and and sometimes those will just be for low
Speaker 1: cost solutions. So you know, you can come into these
Speaker 1: model portfolios with five thousand dollars and get into a
Speaker 1: model portfolio, but that's only going to have a couple
Speaker 1: of different tickers to it um. The larger the cases
Speaker 1: and the more diversified the portfolio. You might have ten
Speaker 1: or fifteen, but they'll generally have certainly equity and fixed
Speaker 1: income and international exposure. In some cases they will have
Speaker 1: UM alternatives exposure in them too. In some cases, these
Speaker 1: are almost said it forget it like strategic models where
Speaker 1: they don't change much at all over time, and others
Speaker 1: that may be more tactical and move in and out
Speaker 1: of the market's a little bit more and be more
Speaker 1: flexible with what's going on in the in the environment.
Speaker 1: How would model profolios help with rebalancing? How would that
Speaker 1: help the advisor community? So with model portfolios, you are
Speaker 1: outsourcing all the selection part of it, but also the
Speaker 1: rebalancing part of the portfolios. So every time the market
Speaker 1: moves significantly, that rebalancing will happen, either from a manager
Speaker 1: standpoint or investment in our platform will do that. We
Speaker 1: can set it up and say, well, let's just do
Speaker 1: it every quarter or once a year or when it
Speaker 1: hits a certain tolerance and it moves outside of that
Speaker 1: risk spectrum that you signed up for. So it seems
Speaker 1: to me, and you know, the recent sell offs we've
Speaker 1: been seeing, we have seen a lot of the core
Speaker 1: E t F s from Vanguard like I VV and
Speaker 1: VU and I E F A and V E A
Speaker 1: continue to take in money during the sell offs. Correctly,
Speaker 1: if I'm wrong, it seems like model portfolios are part
Speaker 1: of what where the flows are coming from. Despite the
Speaker 1: market conditions, advisors say, hey, look we're gonna put We're
Speaker 1: gonna just use this model. Done now, I'm gonna spend
Speaker 1: all my time right now coaching this investor to not sell.
Speaker 1: And that's their big value add Now now they don't
Speaker 1: have to spend their time as much doing that. Is
Speaker 1: that kind of what's going on now and what explains
Speaker 1: some of the flows into these e t s despite
Speaker 1: the market um on some violent days. Actually it is.
Speaker 1: I mean, these are these are much stickier assets and
Speaker 1: and by and large they're part of a financial plan.
Speaker 1: So the advisors sat down with a client, they've gone
Speaker 1: through this long long term goals for the client, and
Speaker 1: they're saying that this makes the most sense for you.
Speaker 1: We are not going to jump in and jump out
Speaker 1: of the market every time something scary happens temporarily long term,
Speaker 1: these are long term holdings. If you need short term assets,
Speaker 1: put it somewhere else. These models are really here to
Speaker 1: you know, generate income over time and to grow over time.
Speaker 1: And so you don't you don't see those flows nearly
Speaker 1: as much as individual tickers. And what kind of time
Speaker 1: horizon are you typically talking about there? Yeah, time risings
Speaker 1: might be ten years fifty you know, all the way
Speaker 1: through retirements, so it could be a fifty year time
Speaker 1: horizon on on many of these models. Can I throw
Speaker 1: theory out at you that I've been thinking about, there's
Speaker 1: this general filling with like, okay, ETFs are going to
Speaker 1: hurt the market because all these people are gonna run
Speaker 1: when something gets tough, and they'll be like only one door,
Speaker 1: like everybody. They'll say, everybody's gonna try to run out
Speaker 1: the same exit door. Um, it seems like every single
Speaker 1: sell off we see the same thing. We see the
Speaker 1: e t f s tend to take in net flows,
Speaker 1: as do index mutual funds, which are passive. It seems
Speaker 1: to me traditionally those are younger clients and more coached
Speaker 1: clients by these advisors. Now mutual funds people were put
Speaker 1: in there by a broker who got paid from mutual funds,
Speaker 1: so less loyalty and traditionally boomers who may have a
Speaker 1: shorter time horizon. Could we be looking at a situation
Speaker 1: for the next at least fifteen twenty years. We're so
Speaker 1: offs are more about mutual funds having to sell and
Speaker 1: being under severe pressure rather than the passive side. Is
Speaker 1: that something you can speak to from where you said, yes, Um,
Speaker 1: he wrestles with big theories. It's a it's a big theory.
Speaker 1: And I don't want, I wanted to anyone to think
Speaker 1: that we're not going to see outflows out of e
Speaker 1: t s two as markets get you know, struggle. I
Speaker 1: just think that you may not have as much fluid
Speaker 1: e I think the way the trend has been it's
Speaker 1: really more function of costs. So you know, I think
Speaker 1: that's where e t f s are have have an advantage.
Speaker 1: And we've seen by and large advisors more and more
Speaker 1: focused when they're putting put portfolios together for their clients.
Speaker 1: Is much more fee pressure. So anytime they meet with
Speaker 1: a brand new client and they're in a mutual fund model,
Speaker 1: very often they're going to be recommending an ETF model
Speaker 1: or a blended model for their client to reduce the
Speaker 1: cost because we know that particularly down markets, additional costs
Speaker 1: are just going to eat away and corrowed at your
Speaker 1: at your returns. But the person who sought out the
Speaker 1: e t F is they bought it, they weren't put
Speaker 1: in it. And I think that's important because usually that
Speaker 1: person also is a UH student of behavioral finance as
Speaker 1: well and has long term mentality understands. As we say,
Speaker 1: they're chasing patients, not performance, and so I think that
Speaker 1: anyone that's going into these models, I think that's absolutely
Speaker 1: true that there's there We're not going to see a
Speaker 1: lot of that friction and movement in and out. But
Speaker 1: I also think you know, a t F are being
Speaker 1: used from from a hedging vehicle and because you can
Speaker 1: interdate trade them there there's going to be some movement there.
Speaker 1: But I think in the in the models for sure,
Speaker 1: when we don't see nearly the outflows that we'd see
Speaker 1: another asset classes. Yeah, given the interest you're seeing in
Speaker 1: e t F only model portfolios, you know, what is
Speaker 1: your take on the new active non transparent funds coming
Speaker 1: to market? Do you think you know, part of the
Speaker 1: appeal is that they fit into e t F only
Speaker 1: model portfolio. You know what is your sort of take
Speaker 1: on I think that's pretty exciting the non transparent um
Speaker 1: e t F s that are that are moving into
Speaker 1: the marketplace. It will it will allow those traditionally beta
Speaker 1: only or just you know, tracking the market type of
Speaker 1: portfolios to have the ability to outperform, and it gets
Speaker 1: a lot of really smart portfolio managers into that space,
Speaker 1: basically moving their traditional mutual fund models into the ETF
Speaker 1: structure that's more tax sensitive and just a more efficient vehicle,
Speaker 1: lower cost. Right, it obviously forces the collapse of the
Speaker 1: multi share class. Right, they're gonna they're gonna be a
Speaker 1: single share class. They're probably gonna be priced. I mean
Speaker 1: looks like a little bit closer to the institutional costs
Speaker 1: of the mutual fund. Eric and I you know, have
Speaker 1: we've talked about there's a clear interest in why fund
Speaker 1: issuers are moving this direction in part A lot of
Speaker 1: these strategies have seen outflows, but is there really going
Speaker 1: to be and I mean, do you see demand from
Speaker 1: the advisors acting for asking for more active strategies or
Speaker 1: asking for e t F only model portfolios that have
Speaker 1: a better mix of active and passive. Yes, so they're
Speaker 1: they're not asking for the non transparent e t F
Speaker 1: s yet. I think once they're more broadly available in
Speaker 1: the marketplace and they've proven themselves out so that the
Speaker 1: bid asks are are tight and the ap s can
Speaker 1: actually create the shares that they need to to to
Speaker 1: make that market efficient, I think the assets will will flow.
Speaker 1: Um we're already seeing the active passive blends, but they're
Speaker 1: not necessarily the non transparent active passive. So the best
Speaker 1: of both worlds, right, you can have smart beta, you
Speaker 1: can have alpha combined, you get the you know, when
Speaker 1: the markets go down sometimes, you know, the active managers
Speaker 1: can be a little bit more nimble. So maybe those
Speaker 1: combined make a lot more sense. So we have advisors
Speaker 1: building their actice around building active passive portfolios. So I
Speaker 1: think once the non transparents get in there, it gives
Speaker 1: a lot more choice and again you get some benefits
Speaker 1: of that structure. I do think some of the worry
Speaker 1: that we will hear with models sometimes is and we
Speaker 1: see it with the flows. A lot of the flows
Speaker 1: do go into the like the SNP one you know,
Speaker 1: vo or IVV and then the ms C I e
Speaker 1: FO one or the foot seat and they're very similar.
Speaker 1: The e M one which is very similar either it's
Speaker 1: ms CR foot see we call it the core wars
Speaker 1: or the ag the agg or BND which is the
Speaker 1: aggregate bonding decks. Um is there any risk to everybody
Speaker 1: by basically hooking into the same portfolio pound for pound,
Speaker 1: because from the flows, it doesn't seem like there's a
Speaker 1: ton of differentiation. But then when you meet with an
Speaker 1: issue where they will say that they're a niche issue
Speaker 1: where that they can provide an advisor with differentiation UM
Speaker 1: and so. But when we see some of that, but
Speaker 1: largely it just seems like that all the money is
Speaker 1: going into the same sort of four et F categories.
Speaker 1: And we're saying that too. So your traditional strategic model
Speaker 1: has those core elements to it, and that's where the
Speaker 1: flows are going into those just those those asset classes.
Speaker 1: So there, you know, can potentially be some concerned around
Speaker 1: liquidity for those products if there tends to be movement
Speaker 1: all all at the same time. But we also the
Speaker 1: issuers and the models that are providing those are the
Speaker 1: biggest ones out there, so that you know, we have
Speaker 1: certain criteria around how many assets they have to have,
Speaker 1: how long they've been doing this UM. So we're not
Speaker 1: as concerned about the liquidity part of it is is
Speaker 1: UM as we would be for a brand new startup.
Speaker 1: The other thing we're seeing is that advisers saying, all right,
Speaker 1: we're going to take that core, but we're gonna build
Speaker 1: around it. So we're gonna say, you know, we've got
Speaker 1: the core for asset classes, and now we're gonna add
Speaker 1: an income boost from my retirement clients. So there's another
Speaker 1: model condiments, sprinkle a little relish and mustard the Kenship
Speaker 1: on the hot dog. That's what Droll likes exactly. I
Speaker 1: like the relish too, So they'll they'll they'll start building
Speaker 1: around it and saying, you know, we want to want
Speaker 1: a little more income in this portfolio, or we want
Speaker 1: some different variation. I want liquid alternatives in there somehow
Speaker 1: so that we can have some downside protection, whatever it
Speaker 1: might be. So, your your clients are basically advisors, right,
Speaker 1: and we're seeing puns more wealth managers sort of break
Speaker 1: off and do their own advisors shop. What do you
Speaker 1: think the potential of your business looks like here as
Speaker 1: you see more and more of these advisors competing with
Speaker 1: one another um and what kind of opportunity and strategic
Speaker 1: growth do you see in the near term? Yeah, I
Speaker 1: think you know, we only see upside right now. The
Speaker 1: number of advisors that are moving into the model portfolios
Speaker 1: and out of you old old commission products, or or
Speaker 1: actually just doing it all themselves. The organizations they work
Speaker 1: for don't necessarily want them doing that. Anymore. They'd much
Speaker 1: rather have um the compliance structure. They'd rather have it
Speaker 1: outsourced to these enormous firms that have a lot of resources,
Speaker 1: rather than having an visor just going and picking and
Speaker 1: choosing on their own. You know, if if if it
Speaker 1: comes down to some litigation, if they have all this
Speaker 1: backup that's been done, that's a much safer place to
Speaker 1: be than than doing it themselves. You service independent advisors
Speaker 1: and you know when you talk about Meryl ubs and
Speaker 1: these bigger networks of fays where they have to sort
Speaker 1: of subscribe to the Meryl do you find people defect
Speaker 1: from there and become independent and then you're kind of
Speaker 1: where they would go to use something similar. Yeah, we
Speaker 1: see a lot of advisors once their practice gets big
Speaker 1: or they wanted more independence, that they move over to
Speaker 1: the investment platform that that is. That is a common trend.
Speaker 1: We've seen that for many, many years. And you know,
Speaker 1: one we want to make sure we have at least
Speaker 1: the tools and products available that they have where they're
Speaker 1: coming from. So that was one of the um ideas
Speaker 1: behind Investment and why it was started to actually give
Speaker 1: independent advisors the same tools and resources that somebody from
Speaker 1: the wires would have. But that is that is a
Speaker 1: continuing trend was seen. So where are you at with
Speaker 1: assets now? And where do you think you're gonna get?
Speaker 1: So we're at a little over three trillion dollars in
Speaker 1: total assets on the platform UM and as far as
Speaker 1: discretionary assets, uh, we're we're involved in the actual trading
Speaker 1: and is about two hundred plus billion and we're growing
Speaker 1: UM double digits for sure every year. And the models
Speaker 1: business is growing over thirty percent year over year. Models. Well,
Speaker 1: I think we're going to come back to this topic repeatedly.
Speaker 1: And here's a question I have. So, UM your five
Speaker 1: percent owned by Black Rocket. They took they bought a
Speaker 1: small piece of you back in the day, right, Yes,
Speaker 1: And we've tracked this theme that we call getting closer
Speaker 1: to the customer. The et f issuers are looking at
Speaker 1: the writing on the wall. They're like, man, everybody wants
Speaker 1: everything for four basis points. Those advisor fees over there
Speaker 1: look pretty juicy there one percent. And I'm not saying
Speaker 1: Black Rocks doing this per se, but like Vanguard's Launchest
Speaker 1: advisory service, so is Schwab. That's the game. That is
Speaker 1: the game, and it feels like the they're all trying
Speaker 1: to own the get as closely they can to the
Speaker 1: advisor that guarantees flows into their funds, and some of
Speaker 1: them are actually becoming advisors. So from your perch, how
Speaker 1: are you seeing that trend develop? Yeah, I think all
Speaker 1: the providers want to have strategic relationships with all the
Speaker 1: gate gapers or the the big providers and and black
Speaker 1: Rocks no difference. And you know, I don't want to
Speaker 1: say what they are doing is just for distribution. The
Speaker 1: reason they did the investment, it was just slightly under
Speaker 1: five percent, but was more for UM technologists. They have
Speaker 1: a lot of really cool technology tools that they wanted
Speaker 1: to embed into our platform to make you know, UM
Speaker 1: advice much more streamlined and simple. So they've they've got
Speaker 1: some really simple tools that advisors can kind of take
Speaker 1: shortcuts and get get to either models that they want
Speaker 1: UM or they can get advice that they want. So
Speaker 1: that was really the reason for that, you know. But
Speaker 1: the closer thing get to to us and that that's
Speaker 1: not just black Rock, but that's all the providers UM.
Speaker 1: You know, the more UM that's really where distribution is
Speaker 1: coming from these days. And you know, it's not lost
Speaker 1: on us to how much data exists in in the
Speaker 1: likes of those end investors and on mass when you
Speaker 1: serve you know, about a third of the advisory community
Speaker 1: you know, rolled up. That's a lot of insight for
Speaker 1: you know, fund issuers who are trying to sort of
Speaker 1: gore the pockets. Is Yeah, I think from your data
Speaker 1: is a big thing for us. And we have a
Speaker 1: lot of data on all those hundred thousand advisors, but
Speaker 1: all the trends of the flows that we're seeing from
Speaker 1: all the different asset managers. So for those and we
Speaker 1: make that information available to the asset managers, so they
Speaker 1: can be much more targeted when they're going after um
Speaker 1: new assets and they know which advisors are selling more
Speaker 1: of their products and how many proposals are being run
Speaker 1: every day from on their individual securities and so that
Speaker 1: instead of from a retail standpoint just trying to put
Speaker 1: up commercials and trying to you know, blanket everywhere, they
Speaker 1: can be very targeted on you know, different organizations and
Speaker 1: figure out, you know, where where am I best using
Speaker 1: my resources. Let's talk about the models that are you
Speaker 1: said there's over a thousand available right on the platform,
Speaker 1: so there's there's a hundred fifty providers asset managers that
Speaker 1: have about fifteen hundred individual models on the platform, um
Speaker 1: the hundred, So black Rocks one of those, right, okay,
Speaker 1: And then you've got companies that like CLS that only
Speaker 1: does this where also there's models that are for long term,
Speaker 1: but then there's models that are are trying to outperform,
Speaker 1: right like a fund of funds? Is that right? And
Speaker 1: do you have like a separate section in the proverbial
Speaker 1: food store for the alpha generating ones versus the long
Speaker 1: term ones. Yeah. So when we're working with and an
Speaker 1: A Prize and they want to set up models, they're
Speaker 1: not going to turn on all hundred and fifty organizations
Speaker 1: models in that They're going to say, all right, we
Speaker 1: want a low cost solution, we want an income solution,
Speaker 1: we want a strategic solution, we want a tactical solution,
Speaker 1: we want an E s G solution. And they might
Speaker 1: end up with five, six, ten different types of solutions
Speaker 1: that all have several different model portfolios attached to it.
Speaker 1: So it really depends on the distribution chain, the type
Speaker 1: of advisors that they have with the demand is and
Speaker 1: so we help them curate that list down to something
Speaker 1: that's that's more reasonable, so advisors don't have overwhelming choice.
Speaker 1: What other trends in et F s do you think
Speaker 1: warrant discussion? A couple of areas that I think we're
Speaker 1: seeing trends that are are very strong right now. We
Speaker 1: talked about et F models. UM. In some cases they're
Speaker 1: open architecture models, so we'll have a third party picking
Speaker 1: the best et F that are out there. But more
Speaker 1: and more are top two organizations and flows are all
Speaker 1: coming from firms that are only using their proprietary e
Speaker 1: t F s, so they're you know, they may not
Speaker 1: have a selection that's you know, completely broad and can
Speaker 1: cover all the different areas UM, but it's cheap, right
Speaker 1: and and there's no management fee on top of it,
Speaker 1: So our advisors look at those models as the free ones,
Speaker 1: so they don't have to pay management feed, just the
Speaker 1: underlying expenses on those models. So those from a cost
Speaker 1: standpoint are very attractive. They know the brand names of
Speaker 1: these big e t F shops, so they're happy to
Speaker 1: make those available to their clients. So the free I think,
Speaker 1: is one of the big trends we're saying right now. Yeah,
Speaker 1: no Bank of New York is rolling out et s,
Speaker 1: and one of them is zero point zero zero percent
Speaker 1: um JP Morgan's is two basis points. I mean people
Speaker 1: are just look in the future, everybody's canna expect there
Speaker 1: the core at least of their portfolio to be pretty
Speaker 1: much free. Right, Yeah, So so you know what I'm
Speaker 1: talking about is a management fee on top. So traditionally
Speaker 1: a lot of the like in other words, they would
Speaker 1: wave that because you're putting it into their funds exactly,
Speaker 1: which would probably include some of the non free ones, right, right,
Speaker 1: but fair enough, But you're right, there's also the underlying
Speaker 1: is you know, race to zero. So if you're underlying
Speaker 1: costs or twelve basis points or fourteen basis points, you know,
Speaker 1: it's hard to compete with. This is a hard question.
Speaker 1: But you know, do you think it's it's concerning either
Speaker 1: overall or for your business as well? Just to share
Speaker 1: that black Rock and Vanguard have of of passive act
Speaker 1: of passive management, and I don't I don't think it's
Speaker 1: a concern, you know, I think it would be. It's
Speaker 1: a hard entrance point. There's barriers to entry if you
Speaker 1: just want to go after low cost strategic e t
Speaker 1: F models. Right, they have a lot of resources. They're
Speaker 1: doing a very good job in that space. But I
Speaker 1: also think there's a lot of opportunity for other et
Speaker 1: F manufacturers to you know, look at smart beta models
Speaker 1: or e s G models or whatever it might be
Speaker 1: that you know that there aren't great options out there
Speaker 1: in this in the space for so they're they're big,
Speaker 1: they're doing a good job of it, they've got lots
Speaker 1: of liquid, and they've got lots of support. You know,
Speaker 1: I'm not concerned about that at this point. And one
Speaker 1: other one. You know, you have obviously a huge research team.
Speaker 1: How are your capabilities going to have to change with
Speaker 1: sort of maybe more evaluation of active managers. Yeah, that
Speaker 1: that's something we have been working on a lot lately.
Speaker 1: Um So, traditionally we've done more quantitative screening for traditional
Speaker 1: e t F s, but now as you're moving into
Speaker 1: multi factor e t F, so you're moving into these
Speaker 1: non transparent ETFs, you really have to have somebody looking
Speaker 1: deep under the hood to understand how that structure works.
Speaker 1: And so when we're making recommendations, it's it's not just
Speaker 1: you know, looking at these three or five different factors.
Speaker 1: We actually have to understand the team better. Just like
Speaker 1: you would on a traditional mutual fund or the old school,
Speaker 1: you know, asset managers, that's you know, what is their
Speaker 1: investment philosophy? How how's it working? So it's it's certainly
Speaker 1: evolving in our resources are are shifting more onto the
Speaker 1: t F side from a research standpoint. Tim, thanks for
Speaker 1: joining us and brilliance right, Thanks for having me, Thanks
Speaker 1: for listening to Trillions until next time. You can find
Speaker 1: us on the Bloomberg terminal, Bloomberg dot com, Apple Podcast, Spotify,
Speaker 1: and wherever else you like to listen. We'd love to
Speaker 1: hear from you. We're on Twitter, I'm at Joel Weber Show,
Speaker 1: He's at Eric Call Tunas that. You can find Morgan
Speaker 1: at M Barnes six and you can follow Investnet at
Speaker 1: e n V intel. This episode of Trillions was produced
Speaker 1: by Magnus Andricksen. Francesca lead is the head of Bloomberg Podcast.
Speaker 1: Bye