Hoping to continue recent strong growth in its asset-management and service-fee revenues, A. G. Edwards is rolling out seven new portfolios that mix mutual funds and ETFs, created by Ibbotson Associates Advisors. These new offerings give the brokerage firm 34 ETF-related portfolios in its Allocation Advisors program. More portfolio options should be rolled out by year-end.
“This gives clients a lot of investment choices based on their own investment objectives,” says Mike Scafati, senior vice president and manager of managed products. “For brokers, it gives them another tool to meet client needs and another arrow in the quiver of the consulting process.”
Investors can choose conservative, moderate or growth portfolios, including two portfolios that focus on tax-free income. Ibbotson, a unit of Morningstar, uses ETFs for their cost effectiveness; it relies on mutual funds in asset classes such as small-cap and international equity, where more opportunity may exist to add risk-adjusted alpha, Scafati says.
A.G. Edwards was early to the ETF game and launched its ETF model portfolio approach in 2001. The brokerage’s latest portfolio options require a minimum investment of $50,000 and have annual fees that start at 1.5 percent (1.25 percent in ERISA accounts).
In the quarter ended May 31, revenues rose 17 percent over the same year-ago period to $765 million, earnings jumped 50 percent to $78 million, and pre-tax profit margins grew 16 percent. Asset-management and service-fee revenues continue to be the largest source of revenue, 40 percent or $307 million; client assets in fee-based accounts expanded 23 percent, and total client assets ticked up 9 percent (see charts).