Two pieces of news have stood out from the crowd for Allan Lane (pictured), founder of ETF database and model portfolio creator Algo-Chain over the last year and a bit.
The first was Invesco buying Intelliflo, the back-office technology provider which services 30 per cent of the UK financial adviser market back in June 2018. Since then Intelliflo has announced they will be providing a Model Portfolio Service.
The second was more recent, with March 2019 revealing that Goldman Sachs Group had bought Standard & Poor’s Investment Advisory Services, giving the bank another route through which it could sell its funds to investors, in this case largely ETFs, for model portfolios.
Goldman has, until now, not been a huge player in the ETF market in the UK, currently offering 18 ETFs, with about USD12 billion under management, but the S&P assets clock in at USD33 billion in assets.
These two events, have, for Lane, revealed the financial adviser and wealth managers’ healthy appetite for model portfolios built using ETFs. Lane believes that the future will hold more model portfolios, at a lower price, and cites the statistic that more than 50 per cent of all net new assets land on adviser platforms in the form of model portfolios.
To this end, Lane, in association with Wealth Adviser, is to launch its first webinar, Demystifying ETF Model Portfolios: learn how to create model portfolios with ETFs, which will be on 3rd October, at 2.00pm.
During the webinar, Lane will be using the Algo-Chain product to explain why model portfolios are the hot topic of the day, what challenges wealth managers and financial advisers face when they try to create them and, crucially, how the transparency of ETFs can help estimate target risk.
The demonstration will include real life case studies and how model portfolios have been constructed to tailor make investment solutions for clients. Webinar viewers will be given every opportunity to ask questions and interactively contribute to the demonstration.
“Model portfolios are having their moment because, if you launch a fund you have a tight legal wrapper that restricts what you can do but a model portfolio wrapper is in essence a budget line legal vehicle with built in flexibility,” Lane says. “You can get them up and running at a low business cost quite quickly, whereas if you want to launch a fund it can be months of preparation and costly.”
ETFs these days offer access to pretty much all asset classes, but Lane does admit that active funds, index trackers and investment trusts offer alternative exposure to investment markets but suggests that these products need more oversight when selecting the individual funds.
There are two elephants in the room, he says. Woodford, whose illiquidity has thrown the mutual fund world into disarray, and the criticism that ETFs are themselves not liquid.
“We must remember that ETFs cannot be eligible to be UCITS funds unless they meet the liquidity requirements so it is highly unlikely that there will be problems if you use these as building blocks in a model portfolio,” Lane says. “To the best of my knowledge, there are no instances of gated ETFs.”
Register for the Wealth Adviser webinar in association with Algo-Chain, ‘Demystifying the ETF: learn how to create model portfolios with ETFs’ here:
Later in the year, Wealth Adviser is planning to bring the ETF to the regions with a roadshow – watch this space for further news.
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