An Exchange Traded Fund or ETF is a collection of stocks or financial securities that are traded on an exchange. You can buy ETFs if you have an equity brokerage account with your broker. By buying an ETF, you essentially get exposure to the constituent securities of the ETF. A Registered Investment Advisor (RIA) can choose different types of ETFs such as stock, bonds, commodities, currency, and index ETFs, etc. are available on the market.
The prices of ETFs depend on the prices of underlying securities and the intraday trading on the stock exchange. Wealth management software helps financial advisors and wealth managers to select ETFs for investment based on the specific criteria and goals of the client. For example, an RIA will select a low-cost index fund ETF for a client having a moderate-risk appetite and will select a bond ETF for a client with a low-risk appetite.
ETFs can be divided into two categories based on how they are managed: actively managed ETFs, and passively managed ETFs. The fund manager actively buys and sells the underlying securities in an effort to achieve the desired returns, and hence the name actively managed ETFs. On the other hand, passively managed funds do not involve actively buying and selling of the underlying securities, rather the portfolio of shares is held in a constant proportion without changing the composition of the portfolio. The actively managed ETFs typically have a higher expense ratio due to the frequent buying and selling of securities, incurring transaction costs. The expense ratio, however, can be reduced with the help of the wealth management platform as the platform can do automatic portfolio rebalancing, allowing portfolio managers to make an optimal portfolio and rebalance portfolios at lower costs.
Financial advisors also need the best CRM platform for financial advisors to communicate and share different progress reports with clients, allowing the clients to see the updated position of their accounts. CRM platforms such as Junxure will nicely complement the wealth management platform such as AdvisorEngine.com and provide the necessary tools for building, analyzing, and managing the clients’ portfolios.
With the sheer number of ETFs available on the market, financial advisors do thorough research to determine what ETF to invest in and whether to invest in ETFs or not. ETFs provide an easy and cost-effective way to get exposure to a certain class of asset. Not only do ETFs provide upside potential, but ETFs also provide the necessary diversification to the portfolio as well as you can get exposure to a collection of securities just by owning a single ETF. A financial advisor can manage a large number of investors’ accounts using a wealth management platform that will track and automate the portfolio management tasks, enabling the financial advisor to focus on researching what ETFs to choose for a particular client. The financial managers can also invest in CRM platforms to find information about the risk and return profile while selecting ETFs.
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