Why You Shouldn't Buy Your Broker’s ETFs
One of the biggest changes in the advisor-oriented ETF market in recent years has been the sharp rise in broker-owned ETFs, such as those from Schwab and Fidelity. Both have jumped to be major players in the ETF market thanks to their ability to sell these funds on their own platforms. One of the important things advisors need to understand is that a lot of new funds are seeded by the provider itself. Some ETFs have hundreds of millions put into them by their sponsors, which means they are not as liquid, or in-demand as they appear. Hartford and John Hancock are examples of this approach.
FINSUM: Brokers deposit huge sums in new ETFs to make them look established and in-demand. The best way to actually double-check that AUM figures are representative of reality is to look at the volume of shares traded, which is much less likely to be misleading and gives a true picture of liquidity.
- john hancock