Faced with waves of new exchange traded products, financial advisers are at a loss as to how best to put them to work, a dilemma that is leading product providers to offer more robust educational services.
State Street Global Advisors of Boston last week launched SPDR University at spdru.com, a website that offers proprietary research and educational materials for advisers on exchange traded products, the markets, portfolio strategies and practice management.
SPDR University also provides financial intermediaries with the opportunity to "aggregate" continuing-education credits in fractional increments, said Gary MacDonald, director of marketing for the advisor strategies unit at SSgA.
It does so by tracking when advisers use materials that have been approved for CE credits and telling the user when credits have been earned, he said.
ADVISERS IMPRESSED
It is a unique and helpful feature, said Paul Miller, a principal with Axial Financial Group LLC, a Burlington, Mass., firm with $300 million under management.
"I have in my practice two [certified financial planners], and we will eventually have four," he said. "They will need continuing education."
Rather than getting that education by sitting through a seminar, they will now have the option of "building up" what they need while managing their own time, Mr. Miller said.
Exchange-traded-product rivals
Barclays Global Investors of San Francisco and
The Vanguard Group Inc. of Malvern, Pa., also offer the chance to earn CE credits, but not on a fractional basis.
Barclays is reaching beyond its website and plans to send a select group of about 40 advisers to Harvard University in Cambridge, Mass., for two-and-a-half days this summer to listen to professors speak about investing and practice management, said Sue Thompson, national sales manager of the registered investment adviser team for the firm's U.S. iShares ETF business.
Barclays hopes to turn its BGI on Campus idea into a continuing program, she said.
Vanguard a few weeks ago launched an online tool based on a popular print product that it described as an exchange-traded-fund "education system," said Melissa Nigro, a marketing executive with the firm's financial advisers services unit.
Split into three sections, the tool addresses indexing, transitioning client assets into exchange traded funds and Vanguard's ETFs, she said.
Unlike
Barclays or SSgA, Vanguard offers only ETFs, not other products such as exchange traded notes or exchange traded trusts.
Advisers said that for the most part, they are impressed by what the three product providers, which together control more than 80% of exchange traded product assets, are doing.
With the proliferation of exchange traded products — 16 products were launched last month, bringing the total number to 659 — there is more potential to get into trouble, said Nicholas Spagnoletti, a partner at Macro Consulting Group LLC. The Parsippany, N.J.-based firm oversees about $350 million in assets.
"There are so many more of these, providing so much exposure to different asset classes," Mr. Spagnoletti said. "There's a potential for big gains but also big losses."
In such an environment, the company that provides the best education will have an advantage, Mr. Spagnoletti said.
That also is the case for mutual funds, but it is even more significant for ex-change traded products, he said. With the exception of a handful of new ETFs, most exchange traded products are passive investments viewed as commodities or products that for the most part are offered at similar prices, Mr. Spagnoletti said.
Similar products will try to compete based on which has the better underlying index, but because the products deliver similar returns, the debate is inconsequential, Mr. Miller said.
As a result, product providers compete on "what else they bring to the table," Mr. Spagnoletti said.
Advisers say that
Barclays traditionally has provided more services.
"BGI is ahead of the curve," said Jim King, an adviser with Balasa Dinverno & Foltz LLC, an Itasca, Ill.-based firm that manages $1.5 billion in assets.
That is one reason that
Barclays has amassed more assets — more than $320 billion across 159 ex-change traded products as of April 30 — than any other exchange traded product provider.
SSgA was ranked second with $140.97 billion across 67 products, and Vanguard was ranked third with $47.99 billion across 37 products.
SSgA and Vanguard, however, are closing the gap with regard to their outreach and service, advisers said.
SPDR University is a big part of that effort for SSgA, but the firm has also gotten better at reaching beyond web tools to talk with advisers in person, Mr. King said.
For example, SSgA will hold a meeting this summer in New York with advisers to discuss yet-to-be released findings of a new white paper.
Not to be outdone, Vanguard has also been seeking face time with advisers. For instance, the firm came to Mr. Miller's shop to set up a customer survey for him, which it paid for, he said.
Such an intense focus on education and outreach is relatively new, advisers said.
But it is likely to continue.
These types of efforts are the best way for products providers to ensure that they are getting in front of advisers, Ms. Thompson said.
"All [exchange traded product] providers are in the same boat. We can't track who's buying our products," Ms. Thompson said.
"As a result, we find a consultative approach better," she said. "That means talking in consultative terms without having a product that goes with it."
E-mail David Hoffman at [email protected].
