Pay attention to exchange-traded funds says Young

It’s not just that ETFs are a hot new flavour of ice cream, they are a whole different tasty treat, says Young, both better and cheaper. “ETFs are getting spooky,” marvels Young. He says their assets are ballooning, the number of products are proliferating, and he advises forward-thinking advisors to consider positioning themselves to play this opportunity while it’s still early.

Young says the advantages of ETFs for clients are just too good for any ethical advisor to ignore. They could be similarly advantageous to advisors, too, if they could put aside their fear and embrace the revolution. “This is a watershed moment for planners to define themselves in a new environment,” says Young.

Some firms are already doing it, moving into asset-based fee businesses with ETFs forming the core of that strategy. “Clients don’t mind paying fees,” Young says, “and the advisor gets paid for some true advice.” He recommends that advisors prepare themselves to make the switch sooner rather than later, before the business leaves them behind.

“Advisors can talk all they want about the business being about relationships over the kitchen table, but the reality is that mutual funds are not a growth business.” The standard advisor response to that is that clients don’t care about fees, Young says, but he argues that advisors need to think about tomorrow’s client not yesterday’s. “You need to get the early adopters, they are the future.”