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Growing up in a small farming community outside Kansas City, Vince Morris saw his share of poverty on farms, in the suburbs and the inner city. Seeing families struggling first-hand, he helped when he could, and as he earned an economics degree from the University of Kansas, it gave him an appreciation of the importance keeping costs down.
Mr Morris, who is president of financial services at Bukaty Companies, a brokerage, advises companies on their retirement plan design, investment policy, due diligence and monitoring.
Among the FT 401 list of leading US retirement advisers, he has allocated the most client assets to exchange traded funds — cheap tradeable baskets of assets.
He allocates 35 per cent of his clients’ defined contribution assets to ETFs. By comparison, the average allocation to ETFs of FT 401 advisers is 1.7 per cent, with three quarters of the advisers not using ETFs at all. Of the advisers who do use ETFs, the average allocation is 7 per cent.
Ten years ago, he says, he used mainly active funds with some index funds. Now he increasingly uses individual stocks and ETFs. “A large part of it is us talking [to companies] about how we would build a portfolio or how we would manage assets, and that ETFs should be a part of that,” he says.
Since joining Bukaty in 2001 as part owner of its financial services division, Mr Morris has built a business that manages $8bn in 850 corporate and government retirement plans covering more than 102,000 employees. The company manages another $1bn in accounts for wealthy individuals.
When building client portfolios, Mr Morris works with Bukaty’s investment policy committee to set a model line-up of core funds based on macro economic trends. Then he selects ETFs, stocks and other mutual funds that mirror those wealth management models.
Mr Morris says ETFs can be a cheap way to take a broad position on a sector. He gives the example of Energy Select Sector SPDR ETF, which mirrors the performance of the biggest US oil producers. “I can go grab the oil production market with one ETF,” he says.
ETFs also add liquidity to portfolios, which is critical in volatile markets. “If some geopolitical thing happens this afternoon, we can be out of ETFs [fast],” Mr Morris says. “We’d have to wait for the mutual funds to close [to be able to exit from them].”
Cheaper products such as ETFs will probably become more attractive to advisers following the rise in litigation over fees, he says. “I think you’ll see a lot more firms like ours . . . putting together [investment] collections that have lower cost options for our clients,” he adds.
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