The One-Flat-Fee-Fits-All ETF Strategist

July 13, 2017

But we then ask the question, is there an opportunity to add value through a satellite that may be another ETF, or through an active manager?

We have active mutual fund strategies that are in the portfolio solely because of their proven track record as good stock pickers. Each portfolio decision is a different situation, but basically, unless an active manager really brings the flexibility or the alpha we’re looking for, ETFs are a better choice. In the passive space, then, you never choose a passive mutual fund over a passive ETF? ETFs always win?

MacKillop: Correct. We're always using the ETFs. We’ve found that costwise and tax- efficiencywise, ETFs work for us best in most cases. How do you pick ETFs? Are you brand agnostic?

MacKillop: We start out with the entire universe, but we use primarily ETFs that are available through custodians we're working with. Right now, our primary custodian is TD Ameritrade. So for the ETF-only portfolios, we're working just exclusively off of the TD no-transaction fee ETF list. What's been the biggest challenge to running an ETF strategist business?

MacKillop: Just the friction of day-to-day life for financial advisors. Most advisors run relatively small businesses, and they've got lots of things to do.

The challenge for us is to try to break through the noise and try to communicate with them effectively to let them know what we're doing. And then be patient and let them move in our direction at their own pace. It's just really learning to be patient and to accept the fact that not everybody's going to jump on board on day one. You have to take your time.


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