text: Rob: The 401(k) space presents a perfect fit for Active ETFs. However, the problem is that a lot of the benefits of the ETF structure are lost in the 401(k) context. I believe both have a fair shot at representing significant percentage in the retirement space. The 401(k) space is supposed to be pro-investor and yet, it is lacking in transparency, fund selection, and education. We all know we need to do more work here.
  ETFs should represent 50% of the choices in these plans. It is puzzling and depressing to watch, all the ignorance and old-boys networking that has kept progress from revitalizing the system. Part of that is exacerbated by fund consulting firms who are too cheap to pay their employees anything other than entry level salaries. On other hand, mutual funds, just like Edison’s bulb, which still exists 100 years later, will continue to be a big part of this space, because of its long-term orientation. Humans hold psychological naiveté and an innate desire to trust human beings at managing risk.
  Rob: The perils of unproven performance, unwillingness to disclose investment strategy, “wait and see” attitude from the market makers. On the regulatory front I have been encouraging the SEC to work with the ETF manufacturers in teams and see them as the great visionaries they are and not like “this new guy keeps calling me, what should i tell him”. The SEC has a responsibility to embrace and work together with the ETF pioneers, the young relentless talented people who made American investment products the envy of the world. These products are now affordable, transparent and fit for the social good. Why is the SEC so slow and hard to reach? My goal is ensure that our markets remain competitive to London, Frankfurt, and Hong Kong. It should be their goal too.
  Shishir: What are the reservations that financial advisors have expressed when it comes to using these Active ETFs in their portfolios?
  Rob: It is very simple. Financial advisors are saying: show me performance, tell me a story, and make me trust you. What is trust built on: reputable history, impressive resources, relentlessly supportive marketing and proactive customer service. Unless these are delivered, no fund firm has a shot at making impact on the intermediary. You don’t go to sell a product; you go to provide a solution to show them how this product is better than what they are using. Otherwise they won’t listen. You need to learn to hold their hands and still be a mentor. So hire your wholesalers accordingly.
  Shishir: Do you still see many advisors leaning towards active management despite the rise of Index ETFs?