The explosion of ETF assets from zero to almost $50 billion between 1993 and year-end 2000 marked an unusually fast rate of growth. Normally, such a quick clip would tend to decelerate after a while, yet the past six years have seen U.S. asset levels ascend to $337 billion as of the end of July, according to the Investment Company Institute.
By contrast, U.S. mutual funds have reached $9.4 trillion in assets — a healthy gain from the $7 trillion logged by year-end 2000, though nothing like the nearly sevenfold increase experienced by ETFs during the same period.
If you didn’t buy the stock of any of the main ETF manufacturers a few years back, it’s still not too late to profit from the momentum these products seem to enjoy. One way to do that is by becoming an ETF advisor, as this month’s cover story (“The ETF Advisors”) amply illustrates.
It is often said that advisors are forced to compete with other advisors who all have the exact same products to sell. While this may be true in theory, the statistics outlined above show that ETFs are still a niche product compared to the mutual funds that are so widely held among U.S. investors. That, together with the cachet, consumer-friendly image and wide appeal they enjoy, is why becoming an ETF advisor can serve as a powerful differentiator.
But do you really want to stand out from the crowd? Some people are not comfortable wearing a suit and tie when everyone else is in T-shirts and shorts. Another question is, does the suit fit you? ETFs tend to work best with advisors who charge a fee for their advice; that may not fit you if you run a commission-based business.
But the ultimate question is how do you look at yourself and how do you want others to see you. Our identities are not static. We can change if we really desire to. A great many advisors long to switch to a fee-based business model, but feel powerless to convince their clients to come along for the ride; they feel the clients will balk at paying for advice.
The true barrier though is less the client’s resistance than the advisor’s self-image. If you genuinely feel you have financial wisdom to impart, then you need to get out of that metaphorical Hawaiian shirt and dress the part of the advice-dispensing professional. It takes time and it takes certain accoutrements to convince yourself of your new value proposition. Until you see yourself wearing a suit every day for a few months, in your own mind you’ll be that casually dressed commissioned rep in disguise. So if you’re shopping for an improved image, you might want to consider buying a new suit, and you might also want to give ETFs a try.