Erik Liik, CEO of FocusShares, sat with AdvisorOne for an exclusive interview Monday at IMCA’s annual conference in National Harbor, Md. FocusShares, which was bought by Scottrade in June 2010, launched 15 ETFs on March 30, 2011, and much of the conversation centered on the product's recent one-year anniversary.
“The 15 ETFs all track Morningstar indexes,” Liik (left) said, when asked about what makes FocusShares different. “We have our Total Market Index ETF, and all the other ETFs are driven by that product. It offers large-, mid- and small-cap exposure, as well as exposure to 11 specific sectors like real estate. That level of diversification and exposure are not true of all indexes that people go to.”
He added that no security in the index has more than a 20% weight, another differentiator for the product.
“Take tech, for instance," he said. "There will be overexposures to companies like Apple where that portion of the index gets so big it almost becomes the Apple index. We make sure that doesn’t happen.”
The products have true ownership of the underlying indexes, tracking to them “very closely,” Liik said.
“Too often, ETFs ‘mis-track’ the underlying index, which ends up being a significant cost to the advisor and client. With us, you can go to our website and find the underlying correlation and how closely it tracks.”
The products, already in the low-cost ETF industry, boast even lower costs when compared with rivals, Liik says. The Total Market Index has an expense ratio of five basis points, and FocusShares’ sector-specific ETFs have an expense ratio of 19 basis points.
“For Scottrade’s advisors, affiliated RIAs and three million retail customers, there is no load and low expense ratio,” he added.
Shares outstanding are up 10% since February 1, partly the result of third-party recognition in Kiplinger’s and The ETF Database, in which FocusShares was called one of the cheapest ETFs and one of the most user-friendly, respectively.
Liik said he expects the strong inflows to continue, especially as more RIAs are added to Scottrade Advisor Services, which recently celebrated the signing of its 1,000th advisor.
“Overnight success in the ETF space is difficult,” he concluded, “but we’re doing it right by tracking closely to the index and having a very low cost. And now the word is getting out. We’re the best deal on Wall Street.”
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