There are winners and there are losers, which side will you be on?
"Dog Eat Work"
Self-preservation is part of human nature and sometimes that means throwing people under the bus. Now add vast sums of money into the equation and you have “Royal Rumble” scenario playing out for who is viewed as the best.
The world of asset management has been referred to as a “dog eat dog” work environment where shifting blame becomes second nature. A study of pensions stated, “pension bosses delegate money management to reduce their responsibility for potentially poor performance of the plan’s asset”, which allows them to point the finger at someone else if performance declines.
The Never-Ending ETF Black Friday Sale
Who is to blame for the seemingly endless ETF fee reductions?
The first culprit are Financial Advisors; they allocate a substantial amount of capital for investors and have increasingly been favoring the lowest-fee funds.
Our second suspect are ETF providers themselves. They are, after all, the ones offering these discounted products. Data from investment companies show that “the average ETF fee has been steadily declining for years”. Eric Balchinas, from Bloomberg’s ETF, mentioned how a new ETF was undercutting another ETF’s fee by only 1 basis point which shows the trend is not stopping!
The media is also to blame as it has waged a war on the cost of investment fees. As a consequence, investors are now prioritizing low-fee ETFs during their selection process.
Finally, Jack Bogle had a hand in this trend. As the founder of Vanguard, he based his company on providing an alternative to high-fee funds.
Show Me The Money
Firms are chasing the cash and lower fees brings in the cash, but at what consequence? The industry is hitting a point of diminishing return as the big players battle over a couple basis points. Firms can only lower their fees so much before profitability becomes a concern and cuts need to be made. At BlackRock, 3% of the staff was laid off and will it stop there?
Navigating through this war of fees can be overwhelming when trying to choose the right fit for your portfolio strategy. ETFication will help educate you on how ETF’s can add value to your portfolio and how to choose the correct ETF for your investment goals. By using the Portfolio Shepard app, you can become more knowledgeable and take control of your financial future!
Source: https://www.etfstream.com/feature/9479_etf-insight-why-the-hype-around-fee- cuts-is-overdone/