2018 Inside ETFs recap with Vanguard

February 1, 2018

 

The recent 2018 Inside ETFs conference marked not only the 25th anniversary of ETFs but also 11 years of partnership between Inside ETFs and Vanguard, who has been the diamond sponsor of the conference since 2012. Over the four-day event, the conference featured a wide range of topics in the form of keynotes, track sessions, Q&As, and panels. The topics covered included ETF how-to sessions, smart-beta strategies, emerging markets, and industry challenges. Vanguard was represented by our CEO and other experts, who were among the main-stage speakers at the conference. Our speakers shared insights on how advisors can leverage technology to benefit their practice, strategize with their use of factors, and prepare themselves for the future of ETFs. Vanguard also designed two large booths around resources to support advisors, which included opportunities to meet with our thought leaders and representatives to discuss the research pieces we had on hand.

Tim Buckley: Capitalizing on disruption

Tim Buckley, Vanguard president and CEO, delivered the conference's opening keynote, "Capitalizing on disruption." In his first public address as CEO, Buckley shared his insights on keeping pace in an evolving investment and advisory landscape. Buckley encouraged advisors to embrace the disruption of technology to streamline their operations and spend more time on behavioral coaching. Citing Vanguard's new research, The evolution of Vanguard Advisor's Alpha®: From portfolios to people, Buckley asserted that while technology could do repetitive tasks, it could never replace the uniquely human capabilities of creativity, empathy, thinking, and flexibility. Buckley concluded by urging advisors to focus on being responsive and proactive in building their relationships with clients.

"Winning advisors will embrace low-cost funds and use automation to lower their own cost structure," Buckley said. "They will provide greater value than ever before by focusing on what computers can't do: Behavioral coaching and creating custom solutions for everything from long-term care to intergenerational security. Embracing the disruption of automation affords you the opportunity to develop deeper levels of trust with your clients, improve their outcomes, and better their lives. And, ultimately, that's why we're all here."

John Ameriks and Fran Kinniry: Factors and the future of ETFs

Besides Buckley's speech, the conference featured other Vanguard experts who shared their views as part of panel discussions.

John Ameriks and Fran Kinniry: Factors and the future of ETFs

John Ameriks, global head of Vanguard Quantitative Equity Group, was featured on the panel "Beyond the hype: Strategically implementing factor-based ETFs." In his remarks, Ameriks emphasized that factors aren't new and that what's new is using the factor lens to evaluate and fine-tune portfolios. He stressed that factor investing is an active decision; factor indexes simply have active management decisions baked in. Ameriks also contended that factor funds aren't meant to replace broad-market exposure but are a complementary means to achieve specific investment goals.

John Ameriks and Fran Kinniry: Factors and the future of ETFs

As part of the "Big questions, straight answers: The future of ETFs" panel, Fran Kinniry, global head of portfolio construction and head of Investment Research in Vanguard Investment Strategy Group, tackled audience questions about the ETF industry. Kinniry pointed out that over the past 15 years ended December 31, 2016, investors have placed 100% of net new cash flow into the bottom cost quartile (lowest 25%), while the higher-cost quartiles (remaining 75% of funds) were in net redemption. Kinniry observed that more than $7 trillion was still in high-cost mutual fund assets and that the "great awakening" low-cost revolution had just begun. According to Kinniry, indexing and ETFs are two of the greatest innovations for investor outcomes over the last century, and he added that ETFs, particularly the ones developed prudently, are here to stay.

Notes:

  • All investing is subject to risk, including the possible loss of the money you invest.
  • Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

 

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