Actively managing passive investments while acting in the Best Interest of your client

How do you know if you have the best ETF in your model? 

As a follow-up to my Monday blog post on Modern Portfolio Theory, I wanted to show some ways to use PortfolioWise to help you act in the best interest of your client while actively managing an ETF portfolio.

As an advisor, I always sought to align client portfolios with their risk tolerance, the stated goal, and their timeline as best I could. In doing so, I discovered that not only is diversification important, but aligning the portfolio so the components work in conjunction toward the stated goal. 

Advisors have re-tooled their practices in recent years and the proliferation of new technology has increased efficiency and knowledge of portfolio structure. With the launch of the new SEC rule REG BI going into effect June 30, 2020, staying compliant is a process that needs to be demonstrated. PortfolioWise is the latest in the ETF space that empowers the advisor to take a deeper dive into an ETF and develop a portfolio that fits well with their clients tolerance for risk and stated goals. This might fit into your customer relationship summary, CRS, that is now required under the new REG BI rule. 

Using our screener to search a multitude of criteria in a wide universe of ETFs, you’ll be able to narrow your choices down to the top ETFs in each asset class, style and size. Just this step alone is a time saver. 

To further cull the list, you can use our raw scoring in conjunction with our ETF rating, which helps you align the allocation with better rated ETFs. This keeps the portfolio in step with what Dr. Markowitz might have intended, which was to maximize the expected outcome (utility as he wrote it) in a given period, whatever that period may be for your model. As the ratings change, you’ll be alerted and can make necessary changes as you see fit. 

Additionally, Dr. Markowitz added, This single period utility function may depend on portfolio return and perhaps other stated variables,” and PortfolioWise allows you to search based on multiple variables to assist you in locating the best ETFs to choose, including performance. 

Looking forward several months or longer, our ratings can be a great guide post. Our sector grid is also a great starting point, along with our dashboard that highlights the strong and the weak areas of the market and your client models. 

3-minute workflow using our screener and comparison tools

Below is an example of a screen that looked for ETFs that turned Bullish this week that is sorted by one-month performance which could represent momentum areas in the market:

Next, I simply added them to a comparison tray:

And lastly, I added those names to a comparison screen and created a 3 month chart for the first 5: 

Finally, being able to add your own logo, disclaimers and personal information to an easy to read print out helps to effectively communicate the investment choices to your clients. It’s easy to implement and clients can easily understand the process. Take a free trial to see for yourself: Free Trial

Pete Carmasino is Managing Director at PortfolioWise, an ETF ratings system powered by Chaikin Analytics. Pete has over 25 years in the capital markets industry. He previously ran his own RIA firm for several years where he created his own ETF model strategy. In prior roles, Pete was a High Net Worth Advisor and Institutional Sales Trader.

Follow Pete on Twitter @carmasino.

Scroll to Top