Advising Same-Sex Couples With ETFs

September 10, 2015

[This article originally appeared in our September issue of ETF Report.]

A Vietnam vet and graduate of both Stanford and Harvard Business School, Norman Boone founded Mosaic Financial Partners in 1987, right at the genesis of the financial planning industry. He had no clients, no assets and two small kids to take care of, but with determination and dedication, Boone built a successful practice over the next three decades. Today Mosaic boasts $600 million in assets under management and 20 employees.

"I think what sets us apart is that we help people put money in context," said Boone. "People almost always already have the answers they need; they just haven't realized it yet, or figured out how to put the individual pieces together."

Another way Mosaic sets itself apart? It proudly markets itself as an LGBT-friendly firm, with financial planner Steve Branton specializing in the particular financial challenges same-sex couples face. "We as a firm try to do everything we can to not only be sensitive to lesbian, gay, bisexual and transgender (LGBT) issues, but to actively support the community," said Boone.

Recently, ETF Report sat down with Boone to discuss the shifting financial landscape for same-sex couples, how ETFs can help LGBT investors and, of course, how Mosaic implements ETFs in its portfolios.

How do you use ETFs at Mosaic?
We were very early adopters of ETFs. We started using them in 2001 or 2002, because they just made so much sense. They’re typically less costly to trade, you can trade them intraday and their tax treatment is typically much more favorable than with mutual funds. You can also do block trading, which is attractive. And if you want to, you can get very specialized with ETFs: If you want to invest in, say, Indian small-caps, there’s an ETF you can use.

There are some operational challenges with ETFs versus mutual funds, however. One of the things that has us a little edgy is the flash crash from a few years ago, when suddenly a couple of ETFs traded at prices that had nothing to do with their underlying net asset value (NAV).

It only happened for a short period of time, but if we’d had in a market order, we could have gotten really hurt. We tend to always put limit orders on ETFs when we trade, but those have their own problems. There’s a three-day wait to get your cash, rather than a one-day wait with mutual funds, and so forth.

So it’s this balance. We try to be thoughtful about what’s going to be best for the client. Sometimes mutual funds are the best option. Sometimes ETFs are the best call. We’re agnostic about it.

How do you use ETFs in your clients’ portfolios?
We tend to be strategic, rather than tactical in our investing. In our portfolios, I’d say we probably use about 10-20 ETFs across various segments or in various ways. There’s a similarity of holdings across our portfolios—not necessarily of allocation, but of holdings—because we believe that if we find a product that’s better than what we’re currently using, then all our clients should have access to it.

What are some of the ETFs you use in your portfolios?
One that we like is the iShares Core MSCI Emerging Markets ETF (IEMG | A-99). That’s different than the iShares MSCI Emerging Markets ETF (EEM | B -98), in that IEMG includes both large- and small-cap emerging stocks. EEM is mostly large stocks. That makes EEM more liquid, so it’s easier to trade in and out of; but since we don’t trade in and out, we’re less concerned about that.

Costwise, though, IEMG is 50 basis points less expensive than EEM. So since we’re not active traders, if we have to pick, we’ll go with IEMG, so we can get more diversification and at less cost.

Find your next ETF

Reset All