Profound Pricing Strategy Differences
But perhaps nowhere is the profound difference in pricing strategies more evident than in this table.
While Vanguard has 24% of industry assets, it takes in less than 9% of the till. Schwab, who’s risen rapidly into the top tier of issuers by assets, takes less than a percent of the revenue generated. That’s what a 0.03% product [the Schwab U.S. Broad Market ETF (SCHB)] does for your bottom line.
Conversely, firms like First Trust and ProShares, which are built on niche products with higher expense ratios, rocket to the top of the implied annual revenue chart.
I think looking at the bottom of the chart is almost as telling.
Most of these issuers are obviously quite new to the space, and are just starting to gather assets. But the next time I get an email suggesting the ETF space is easy to enter, I think I’ll show them this chart. Even firms that have had strong initial openings, like Nuveen and Davis, aren’t exactly covering their costs. It takes a lot more than $100 million to really carve out a nice business here.
But let’s peel the onion in some different ways. If you wanted to actually make money in the ETF business, what would you launch?
We’ll, let’s exploit my pathological love for pivot tables and find out...