It looks like Sweep was right. ETF’s apparently are coming under a lot of scrutiny by the SEC.
If I decide to put my clients into passive funds, anybody have any recommendations on good passive mutual fund families? No DFA (since my B/D doesn’t sell them) and no Vanguard (because I hate them).
edit - I know Fidelty Spartan has some good ones, but I’m not looking for just a couple of good funds. I’m hoping to keep all of the funds within one family, to the extent that this is possible. So I need a fund family that has everything available to it. I was going to go with iShares, but now I’m thinking that I need to heed Sweep’s advice and go with open-end index funds, rather than ETF’s.
Why do you hate Vanguard? Very rarely are your clients better off in iShares.
Vanguard’s index funds aren’t even allowed on some b/d’s platforms because they don’t ‘pay to play’. That’s probably why i view them favorably. If your goal is low cost passive indexing, my vote is vanguard.
Why do people never post this stuff in Investments forum? Then it gets moved there and when anyone posts in this topic it gets bumped in Investments & WC and its rather annoying.
Why do you hate Vanguard? You need to specify when you say you hate the industry standard for passive. Pretty Sure BlackRock has a comprehensive set of passive funds both in Equity & FI. Not sure on the expense ratios on them.
Vanguard is a good company with good funds. I agree fully that it is definitely the best passive shop in the game.
It’s not the company I hate–it’s the people. I hate having to listen to the idiots who can only say, “Cuz Jack Bogle said so!” and “What would Vanguard do?”
Plus, I don’t want clients googling “Vanguard” when they get their statement, then ending up on the Bogleheads forum, and there goes my revenue source. Maybe some of the more experienced can tell me whether this actually happens in practice or not.
Advisors really have two choices moving forward, they can either embrace the passive side and provide complementary services, or they need to provide positive value through active management. As most advisors (not you greenman) have very little ability to provide investment advice (let alone market beating), they’re going to be forced to choose the first option or slowly go out of business as their clients realize they’re overpaying for a service that they can get through wealthfront or vanguard. This will be especially true if 12b-1 fees go away.
The way to make a living as an advisor, assuming you’re not going to deliver enhanced portfolio management, is to embrace the low cost passive investment strategy and provide complementary services which you collect a fee on. Financial planning should be the heart of any advisors practice, charge a fee for it. Online robo-advisors will never be able to substitute for a solid financial plan and the behavioral coaching that goes along with a solid plan. “Your investments are down 20%? Here, let me show you what this has done to your retirement plans…”. There are obviously opportunities to sell insurance and annuities appropriately. Life insurance is a great way to pass money to heirs. Longevity annuities, used properly, are a great way to help ease a clients mind about running out of money in retirement.
I don’t see any advisors being sucessful over the next 10 years without either:
A.) Delivering enhanced returns (risk adjusted if thats what your clients are looking for)
B.) Delivering a suite of complementary services that can’t be done via robo-advisors
C.) Lying to their clients about the ‘value’ they’re delivering and praying that their clients remain willfully ignorant
Its blackrock, through iShares. They recently became competitve with Vanguard for some of the basics… IVV vs. VOO for example.
iShares is owned by a company whereas Vanguard is owned by it’s clients. The incentives at Vanguard are pro-client whereas the incentives at iShares are eventually to the shareholders of BLK. In many cases the iShares will deliver the same product as Vanguard for a higher price. In these cases, this would be an example of choosing option C from my last post.
For example, a diversified real estate ETF from iShares charges a management fee of 0.43% (IYR), whereas the vanguard fund charges 0.12% (VNQ).
If your question is what is best for your clients and your practice, it’s vanguard.
*sorry, didn’t mean to turn this into a pro-vanguard sales pitch thread. I just don’t know why anyone would use anything else if they want to track indexes.
I have very little experience here, but here’s a comparison…
Vanguard FTSE Canada Index ETF vs. iShares MSCI Canada
Nearly identical top 10 holdings…small variance in sector exposure…identical dividend yield, sales growth, P/E, etc…
VCE (vanguard) has only been around since 2012 but has outperformed in every year.
2012-outperformed by 74 basis points
2013-outperformed by 72 basis points
2014-outperformed by 163 basis points
2015-outperformed by 20 basis points
2016 YTD - outperformed by 65 basis points
iShares charges 0.48% as a management fee while Vanguard charges 0.05%. This should explain an average of 43 basis points of outperformance per year. The rest must be do to slightly different holdings. Either way, you’re paying more at iShares to basically hold the same fund.
Obviously there’s probably actively managed ETFs or mutual funds that have outperformed both ETFs, but from a simple indexing perspective I just don’t see why anyone would prefer iShares. Again, if we’re talking small cap value or something like that, its a different story, I’m referring to the broad indexes.