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Asset Managers Should Develop Tools to Help Advisors

By Jesse Mark

U.S. ETF assets have topped $1 trillion and the race to create ETF analytical tools has begun. Last week IndexUniverse announced a newly developed exchange-traded fund rating tool, a direct assault on Morningstar's hegemony in the market.

The problem is that ETFs are less understood by advisors and investors alike. Since ETFs are here to stay, the question most advisors are grappling with is how to analyze these products and feel comfortable buying them. Advisors want to know what makes a good ETF!

Instead of forcing advisors to rely on third-party analytical tools like Morningstar and IndexUniverse, asset managers should develop their own tools to help advisors. The asset managers that create tools and analytics for advisors to showcase why their products are superior will have an instant advantage in the competitive ETF race.

Through FA Vision, kasina surveyed advisors and asked them why they visited asset manager Web sites. The results are illuminating. Data on pricing, performance and products are among the primary reasons advisors go to firm sites. Yet, roughly only 48% of advisors use firm sites for tools, news and commentary. Perhaps, advisors use tools less often because the current offerings aren't highly informative.

Advisors are increasingly analytical so putting tools into their hands make difficult decisions about cost of products, tracking error, liquidity, and track record, a little easier. Advisors will use analytical tools whether you develop them or not. So why not create one yourself?

For more details, Ignites (subscription required) covered the IndexUniverse announcement in more detail, with contributions from Eric Daugherty, Principal and Director of Research at kasina, who attended 4th Annual Inside ETFs Conference in Hollywood, Florida.