Any experienced advisor can attest that shortly after making an allocation to a mutual fund, a phone call from a regional investment consultant of that mutual fund firm is all but guaranteed. The investment consultant thanks the advisor for their business and offers to provide ongoing customer support and education on the recently purchased mutual fund — primarily to ensure that the advisor remains happy with their decision and to inquire about increasing their investment allocation.
The consultant will also take the opportunity to promote and discuss other strategies offered by the mutual fund sponsor. The role of the investment consultant is a critical one that serves both as an ambassador for the organization and a resource for the advisor to ensure that their practice receives necessary and regular updates regarding any changes to a fund or important communications from the portfolio manager.
While commonplace for mutual funds, this kind of outreach rarely occurs with an ETF purchase. Broker-dealers and custodians do not typically provide shareholder data to ETF sponsors. However, this trend has slowly begun to evolve over time. Firms such as Broadridge provide some data, which can carry limitations for smaller ETF providers not only due to the expensive cost of purchasing the offered solution but also in how to effectively utilize the information. SEC Form 13F filings offer a source to locate ETF investors; however, significant limitations come with that material as well, including its timeliness.
With the continuous and fast-moving migration of assets from the mutual fund structure to the more flexible and tax-efficient ETF structure — which includes both passive and active vehicles — advisors and investors continue to vote with their dollars for a better and more modern investment structure. Broker-dealers and custodial platforms now face the continuous loss of significant revenue that used to pay for the costs of various services provided, including data around mutual fund purchases and sales. Such data is important to ETF sponsors, and presents an alternative avenue for custodial platforms to provide both an important service and a revenue source for its own business.