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Portfolio > ETFs

Industry Risks and Other Problems, Per Ric Edelman

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Ric Edelman is on a mission to warn financial advisors that the world they live and operate in is poised to change dramatically and exponentially within the next 20 years, if not sooner. Many of their clients will live beyond 100 years old due to advances in medicine and genomics, retirement will become obsolete and close to half the jobs that exist currently will disappear.

“Ask your client if their job is safe … if their employer is safe. … We have to start retraining ourselves to be vital for our clients,” Edelman told the crowd at the Inside ETFs conference in mid-February.

It’s a warning that Edelman, founder of Edelman Financial Services, which merged with Financial Engines last year, has made times before. This time he also listed the industries that will be at risk, which could impact the stocks in which advisors invest clients’ funds.

“By 2025, 40% of Fortune 500 companies won’t exist,” said Edelman, referring to a study by the Olin Graduate School of Business, which he also cites in his book “The Truth About Your Future: The Money Guide You Need Now, Later and Much Later.”

“By 2035 47% of current jobs won’t exist,” due to robots, AI and blockchain, according to Edelman. “Technology will wipe out a vast array of jobs.”

Then he listed those industries that are at-risk: life insurers, annuity marketers, disability insurers, long-term care insurers, and nursing homes because people will be living much longer and healthier lives; auto insurers and automakers because there will be self-driving cars that will service individuals who will no longer need to own a vehicle — “they’ll take the one that comes next” — and chiropractors because there be less accidents and less whiplash from self-driving vehicles; the energy sector because of widespread use of solar; and banks and brokerages because of blockchain and cryptocurrencies, which will wipe out the middleman.

There is good news, according to Edelman. Billions of dollars worth of opportunities in big data and robotics and the U.S. will be a prime beneficiary of this change. “Whoever owns the info, the data, wins.”

ETF Differentials Advisors need to do their homework when it comes to investing in ETFs because “holdings and costs drive ETF future performance more than their historical record,” says Todd Rosenbluth, director of ETF and mutual fund research at CFRA, an independent research firm.

Buying the cheapest, better past performer and commission-free ETF is not the best strategy, said Rosenbluth, who spoke at the Inside ETFs conference. “Know what’s inside a portfolio.” Case in point: two semiconductor ETFs both lost money in 2018 but one far more than the other. The VanEck Vectors Semiconductor ETF (SMH) fell about 6%; the SPDR S&P Semiconductor ETF fell close to 10%, in large part because it had a much heavier weighting of Intel, which was basically flat in 2018. It also owned Lam Research, which lost close to 30% last year.

Another example from Rosenbluth showed a much greater disparity in performance: two ETFs with “uranium” in their names: The Global X Uranium ETF (URA) lost more than 20% in 2018; the VanEck Vectors Uranium+Nuclear Energy ETF (NLR) gained about 5%. Despite the similarity in names, the VanEck ETF was heavily invested in utilities, which are the key owners of nuclear energy in the U.S. and one of the strongest performing sectors in 2018. The Global X ETF owned few utilities but was heavily (40%) invested in energy stocks, the worst performing sector last year.

Another warning: “The largest, cheapest ETF is not necessarily the best.” IVV, iShares Core S&P 500 ETF, and SPY, its SPDR counterpart, are the two largest ETFs by assets, but they have experienced the biggest outflows among ETFs so far this year. Although both are ETFs based on the S&P 500 index, IVV had inflows of $18.5 billion last year while SPY had outflows of $16.5 billion, according to

Bernice Napach, senior writer for, can be reached at [email protected].


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