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Dave Nadig
3:13
which is a quite specific set of guidelines.
3:14
And then there's just a whole raft of "issues-based" or even "faith-based" approaches that are really all unique.
So it's a pretty personal definitional issue, especially since manytimes the investor is looking to meet a non-economic need.
Robert Ferman
3:14
Hello Dave. Do you see robo advisors utlimately replacing human advisors?
Dave Nadig
3:14
Hi Robert, GREAT question
3:15
So, for a certain class of investor, who would otherwise by a DIY schwab customer, for instance, I think Robos can be a great uptick in their asset allocation sophistication.
But most financial advisors havent built practices on 100K accounts with a few positions, they've built them on much larger and more complex situations.
3:16
So theres this narrow band for folks where a Robo might be ALL they need, and then theres another band where you might need a human once in a while, but your asset allocation/rebal work is all handled through a white-label robo approach.
I mean, just today I saw an article abotu how Betterment was trying to do MORE face to face work with customers, not lest.
3:17
So I think the pendulum is swinging more towards "bionic" approaches, which, incidentally, is the way it works for Vanguard, and the way it works in all of Canada.
Guest
3:17
Hi Dave. Writing from Canada here, so naturally my question is surrounding Active ETFs - they are expensive, non-transparent, and encourage regular trading (possibly the worst thing you can do to a portfolio). Yet they are popular, and only getting more so. What gives?
Dave Nadig
3:17
Speaking of Canada...
So last I looked, Active ETFs in Canada were about 15% of the market, and 1-2% of the U.S. market
we've seen some product launch here, but not a lot of assets.
3:18
and if you remove PIMCO and Doubleline total return products, its a tiny number.
There ARE some products that are doing well (both assets and performance) -- ARK and Davis come to mind there.
but the flows really havent blown the doors off.  And ultimately I think it will be a slow trickle.
3:19
The most important impact however, is what's going on in fees. While 60BPS for an ETF all in might seem super expensive
its actually very cheap for traditional active.
So the fee war is coming to active in a big way, and ultimately thats all good for investors.
Heidi Feingold
3:19
HI there Dave, I've been wondering how ETF issuers can survive if they all do eventually get to zero fees?
Dave Nadig
3:19
Hi Heidi,
So, I don't think ALL fees go to zero.
3:20
I think we'll see a handful of core-beta type products go to zero, but not, for instance, junk bond funds.
or smart beta funds.
at least, not in the next 10 years.
But even assuming that, it IS a real issue for companies who don't own a client relationship -- like, say Blackrock.
3:21
Nobody owns IVV directly from blackrock, they own it in their Fideolity or TD account.
Fidelity and TD can make money in all sorts of other ways -- account fees, selling insurance, you name it.
So it wasn't surprising to see Fidelity being the first one to go to zero - they have so many other products -- and expensive funds -- to subsidize the cheap beta.
3:22
I also think you'll see more unbundling -- even in things like 401ks.  Where you get explicit charges for things like recordkeeping.
Im actually all for that -- charge where the expense is.  And the reality is, an incremental dollar in US large cap is effectively free to run for a large index ETF.
OK, a few fun ones and then back to the hardcore ones:
Not an ETF Question
3:23
I know from Twitter you are a gamer -- what's your videogame-of-choice.
Dave Nadig
3:23
Well, there's a new world of warcraft expansion dropping this weekend.  But most often, I play a team game called "League of Legends" -- thanks for asking!
C Tompkin
3:23
Would you consider putting a themed crossword puzzle in ETF Report? I miss doing that from your Journal of Indexes.
Dave Nadig
3:24
We quite literally just discussed this on an editorial call today.  We're considering it!  I'd suspect we'll do one once in a while, but not every month in 2019.
OK, back to the meaty stuff:
Nate Geraci
3:24
Also, thoughts on what happens once Vanguard patent expires from a competitive landscape perspective?
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