CLS Launches ‘Smart ETF Models’ With No Strategist Fee

The RIA partnered with Deutsche Asset Management, First Trust, J.P. Morgan Asset Management, Pimco and PowerShares

CLS Investments has launched what it’s calling “Smart ETF Models,” which utilize products from five exchange-traded fund providers with no strategist fee.

“The advisors and clients won’t have to pay any fee for our model management,” CLS CEO Ryan Beach told ThinkAdvisor. “We have made a deal with the issuers where we get our [investment products] from them in exchange for making the models available to our advisors.”

CLS, an Omaha-based RIA managing more than $8 billion, partnered with Deutsche Asset Management, First Trust, J.P. Morgan Asset Management, Pimco and PowerShares by Invesco to offer these models.

While zero-fee models traditionally contain allocations to only one provider or entity, CLS’ Smart ETF Models will provide advisors with a solution that incorporates ETFs from multiple providers.

“We think it’s pretty novel and new in the industry because right now you can get models for free, but the catch is you can only go to one provider: like a BlackRock or Russell or somebody like that,” Beach said. “We think this is cool because it’s open architecture but at the same time it’s still free.”

CLS currently offers eight Smart ETF Models, which are globally diversified portfolios composed of smart beta and active ETFs, along with smaller satellite positions in ETFs focused on specific sectors, countries and alternative assets.

According to Beach, the models are primarily smart beta — “85% smart beta for the most part,” he said — across all of the models. The models also use “a little bit of active ETFs in there as well,” Beach added.

The Smart ETF Models were designed to focus on total return proportionate to the investor’s risk appetite — or “Risk Budget” as CLS calls it — which can range from conservative to aggressive.

CLS will manage these models with their disciplined and active “Risk Budgeting” framework, and will continue to place focus on the global market. The portfolios will also emphasize ETFs based on factors (or smart beta ETFs), which have historically demonstrated a bias to outpace the market over time.

“When you get free models from other people, basically you’re just getting the intellectual property, you’re just getting the models by themselves. But as a [turnkey asset management program (TAMP)], we have the ability to implement those models and do the trading and do the rebalancing and … value add that comes with that,” Beach explained.

These Smart ETF Models are now available on Orion Communities (through CLS’ sister company, Orion Advisor Services), Envestnet and FTJ FundChoice.

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