In 2001, Vanguard pioneered a novel method for integrating ETFs as a share class within existing mutual funds, propelling the company to prominence in the ETF market. However, this competitive edge dissipated when the patent lapsed in May 2023, prompting a frenzied quest within the fund industry to secure regulatory approval for Vanguard’s ETF share class innovation. 


Noteworthy industry players, including Fidelity, Dimensional Fund Advisors, and Morgan Stanley, have vigorously advocated their positions to the Securities and Exchange Commission (SEC), joined by a myriad of smaller asset managers, propelled by factors such as immediate scalability, established track records, and structurally superior offerings.


Despite prior reservations expressed by the SEC regarding ETFs constructed as a share class of multi-class funds, the industry's push for ETF rule revisions has gathered steam, prompting the active involvement of leading stock exchanges. Analysts anticipate substantial market shifts with any SEC endorsement allowing fund companies to adopt Vanguard's ETF structure.

Finsum: The landscape of for ETFs is changing quickly and the race to the bottom, but regulation will be critical.

According to the study, nearly two-thirds of financial advisors state that they are primarily influenced by factors within their own practice when constructing portfolios. Conversely, these advisors are less likely to take input from their broker dealer (B/D) or custodian. The divergences between advisor channels pose challenges for asset managers in establishing their products and services effectively. 


Cerulli suggests that asset managers concentrate their distribution efforts on channels where advisors rely more on internal portfolio construction methods. Furthermore, the research highlights that advisors within the independent registered investment advisor (RIA) channel tend to construct portfolios internally, followed closely by hybrid RIAs. 


Asset managers who allocate distribution resources towards channels such as independent and hybrid RIAs, where advisors tend to make their own investment selections, may have an advantage in portfolio construction.  

Finsum: Independent RIAs help meet their clients’ needs with better portfolios.

A financial advisor survey by Capital Group reveals a surprising lack of understanding about active fixed-income ETFs. Despite growing demand, less than 4% of assets are allocated to them, with limited advisor confidence in using them. 


Surveyors highlight the benefits of active fixed-income ETFs, including consistent returns, portfolio diversification, and potentially lower fees. This knowledge gap, especially among wirehouse advisors, may be due to their recent introduction. 


Younger advisors seem more receptive, suggesting wider adoption as awareness grows. Capital Group believes active fixed-income ETFs will bridge the gap with passive options, urging advisors to prepare for client interest.

Finsum: Macro climates like the current one almost always give bond pickers and edge, and advisors are missing alpha. 

Treasury yields jumped higher following the hotter than expected March CPI report. The 10-year Treasury yield moved above 4.5%. It has now retraced more than 50% of its decline from its previous high in late October above 5%, which took it to a low of 3.8% in late December, when dovish hopes of aggressive rate cuts by the Fed peaked.

Clearly, recent labor market and inflation data have not been consistent with this narrative. In March, prices rose by 3.5% annually and 0.4% monthly, above expectations of a 3.4% annual increase and 0.3% monthly gain. Core CPI also came in above expectations. 

Instead of trending lower, inflation is accelerating. Now, some believe that the Fed may not be able to cut rates given the stickiness of inflation. Additionally, economic data remains robust, which also means the Fed can be patient before it actually starts lowering the policy rate. 

Some of the major contributors to the inflation report were shelter and energy costs. Both were up 0.4% and 2.2% on a monthly basis and 5.7% and 2.7% on an annual basis. Shelter, in particular, is interesting because its expected deceleration was central to the thesis that falling inflation falling would compel the Fed to cut.

Finsum: The March CPI came in stronger than expected, leading to an increase in Treasury yields. As a result, we are seeing increasing chatter that the Fed may not cut at all. 

Following the better than expected March jobs report showing a gain of 303,000 jobs, Treasury yields moved higher across the curve. The 10-year yield initially rose 14 basis points to a new 2024 high of 4.43% before backing off a bit. Overall, the jobs report reduces the urgency of the Federal Reserve to cut rates given the labor market’s resilience.

Going into the report, consensus expectations were for an increase of 200,000 jobs, which would be a softening from the 270,000 jobs added in February. It adds to the data showing inflation moving sideways rather than lower over the past couple of months. 

Yields also rose on Thursday following comments from Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, questioning the likelihood of rate cuts if inflation continues to linger above 2%. As a result, the odds of the Fed not cutting rates at the May and June meetings have increased. 

Some other positives from the report were the unemployment rate declining to 3.8%, despite an increase in the labor force participation rate to 62.7%. Average hourly wages increased by 0.3% on a monthly basis and by 4.1% annually. Both figures were in line with expectations. Job gains were strong across the board, with the biggest contributors being healthcare, government, leisure and hospitality, and construction. 

Finsum: Treasury yields moved higher following a stronger than expected March jobs report. Overall, the report led to a decrease in the odds of a rate cut at upcoming Fed meetings.

Investors with over $250,000 are increasingly turning to separately managed accounts, allowing them to handpick municipal bonds with professional guidance. These accounts now hold $987 billion in assets, surpassing mutual funds, which hold about $769.7 billion.


This shift has significantly boosted business, with Franklin Templeton seeing a 50% increase in assets under management over the past year and a half. Lowering the minimum investment to $250,000 has made these accounts more accessible, though still beyond the reach of most Americans. 


However, advancements in technology are driving further accessibility, with potential for minimums to drop to $100,000 in the near future. With artificial intelligence breaking down barriers by making management for portfolio quicker to digest the minimums are bound to fall. 

Finsum: The SMA explosion is here to stay in the fixed income market and managers should watch the evolution. 


Over the last year, there has been an increase in the accessibility and availability of direct indexing solutions. Still, the category continues to be dominated by high net worth or ultra high net worth investors. According to Anton Honikman, the CEO of MyVest, there is about $400 billion managed by direct indexing strategies. He anticipates that the next stage of growth for direct indexing will depend on younger and less affluent investors. 

Initially, the primary advantage of direct indexing was that it allowed investors to extract tax alpha. He forecasts that as direct indexing becomes democratized over the next few years, providers and advisors will have to make some adjustments.

He notes that custodians will have to offer fractional share support for the technology to work for smaller investors, as implemented by Schwab and Fidelity, which now offer direct indexing to investors with lower minimums. 

Typically, there is some premium involved with direct indexing over investing in low-cost ETFs. Given the increase in ETF options over the last couple of years, he believes that it marginally erodes the use case of direct indexing for many investors. Over the longer term, he sees the direct indexing premium compressing in order to remain viable vs. a portfolio of low-cost, targeted ETFs. Further, he believes that the next wave of direct indexing will be driven by younger investors who want to align their portfolios with their values rather than optimize their tax situation. 

Finsum: At one time, direct indexing was only available to high or ultra high net worth investors. As it becomes democratized, here are some considerations for providers and advisors. 

Unlike mutual funds or ETFs, personalized indexing permits harvesting losses at the security level, offering more opportunities for ultra-high-net-worth investors to capture additional tax advantages. Tax-loss harvesting involves selling an investment at a loss and reinvesting the proceeds into another asset, a key benefit of direct indexing. 


Direct indexing strategies involve selling stocks below their cost basis and instantly repurchasing correlated replacements to avoid wash-sale rule violations. Since investors own individual stocks in their portfolios, losses can be captured even when the index gains value. DI experts exemplifies this strategy by selling underperforming securities during market gains, using harvested losses to offset capital gains and taxable income up to $3,000 annually, with the option to carry over losses to future years. 


Maximizing tax alpha depends on the frequency of portfolio scans for harvesting opportunities, with daily scanning potentially improving after-tax returns by 1% to 2% or more. Commitment to direct indexing underscores its importance in tax-efficient investing. 

Finsum: The frequency through which a portfolio can be scanned for tax-loss harvesting is making the case extremely compelling for direct indexing.


Broadridge Financial Solutions, a financial technology infrastructure provider, expects total assets in model portfolios to exceed $11 trillion by the end of 2028. This would represent more than a doubling of assets over the next 5 years from $5.1 trillion at the end of last year. This forecast is slightly more optimistic than Blackrock’s prediction that model portfolio assets will reach $10 trillion over the next 5 years.

Model portfolios are increasingly being utilized by financial advisors as the industry shifts to a greater focus on planning and client service vs. investment management. In addition to freeing up valuable time and resources for advisors, research has also shown that they tend to outperform, especially during volatile markets, and lead to greater client satisfaction.

For asset managers, model portfolios are a source of growth for ETFs. Currently, 63% of model portfolio assets are in equities, with 32% in fixed income. ETFs comprised 51% of assets in model portfolios, compared to 26% for mutual funds. According to Andrew Guillette, Broadridge’s VP of Global Insights, “We expect ETFs to continue to take share from mutual funds inside model portfolios, driven primarily by their attributes as low-cost and tax-efficient portfolio-building blocks.”

Finsum: Broadridge Financial is forecasting that model portfolio assets will more than double over the next 5 years. It’s expected to drive growth for various asset managers’ ETFs and help advisors focus on client service and building their practices. 

It’s an opportune time for younger financial advisors. Many older advisors are nearing retirement, and we are on the precipice of a generational wealth transfer from baby boomers to millennials. However, this doesn’t negate the significant challenges and obstacles faced by new advisors, given their high failure rates. Here are three tips from established advisors to increase the odds of success.

According to Timothy Smith, the founder and CEO of Aurora Private Wealth, rookie advisors need to get used to rejection. He believes that advisors need to develop intangible qualities like perseverance, determination, and discipline in order to successfully build a practice. Further, advisors should have a genuine desire to help people feel in control of their financial lives.

Tammy Haygood, a private wealth advisor at RBC, is an advocate for not using jargon and believes that advisors should be able to explain concepts in clear and simple language. This can only be achieved by having a comprehensive understanding of the material and concepts. She also insists that authenticity is key in order to build trust and form long-term relationships with clients.

Nate Lenz, the co-founder and CEO of Concurrent, believes that younger advisors should seek out mentors. He sees financial advice as an ‘apprenticeship’ business. With the right mentor, advisors can quickly become competent and knowledgeable in multiple areas, such as planning, investments, closing deals, and client service. In this vein, he strongly believes that younger advisors should prioritize experience over other factors like compensation.

Finsum: There’s a lot of difficulty and struggle for advisors at the beginning of their careers. Here are some tips from established, successful advisors on how rookie advisors can maximize their chances of success. 

Page 2 of 44

Contact Us



Subscribe to our daily newsletter

We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…