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Lessons from 2020 for the ETF industry

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2020 was one of those years that none of us will ever forget, notes Jillian DelSignore, Managing Director, Head of ETFs & Indexing, FLX Distribution. But, as we keep moving forward in 2021, and we look back on 2020, what are the most valuable lessons to be learned from the last twelve months for the ETF industry.

In the blink of an eye we went from hopping from plane to hotel to office building to hopping from Zoom to Teams to GoToMeeting. Our new normal had us working, presenting, and eventually selling, virtually. While we’d rather leave 2020 in the rear view, it is important to look back at how the global pandemic reshaped the future of the ETF industry in particular what it did to distribution. It is after all the tie that binds this industry and some aspects of it will never be the same.

Creating the relationship roadmap

Let’s start with one key point – the vast majority of ETFs are SOLD not BOUGHT. That means without the right access to the right investors, even the best idea will sit on the shelf. What investors do you want to access? Can they access your ETF? Do you have the resources in sales and marketing to access your desired client base?

These questions have always been a challenge, but with the changes we experienced in 2020, it became that much harder. There was no roadmap out there on how to do that in a completely virtual world. It was always difficult to capture the mindshare of an advisor, but now you had no choice but to land in their crowded inbox, competing hundreds of others looking to land that coveted Zoom meeting. In this case, relationships and resources really mattered.

Distribution is more than just the sales professional, the human capital. There is also marketing, digital, media, solutions, data – the resources. The elevator has to stop at every floor.

Couple this with the fact that the role of a sales professional is changing. ETF sales teams need to have more technical knowledge and take a more consultative approach with advisors. They are as much problem solvers as they are relationship builders. Engaging the advisor isn’t just about my ETF versus the other ETFs – that’s just table stakes. It’s also about offering research to support the due diligence process, understanding how your ETF trades and providing portfolio analytics to show how your ETF fits in a portfolio.

Business intelligence and what is here to stay

Relationships, especially in a more virtual world where you need to have those connections, will always matter but the scale is starting to tip more in the other direction. The direction of being able to offer a diversified set of strategies and value-added services. It is critical to intimately understand the advisors so well that you know their needs before they do – to be that consultant. The days of leaving a fact sheet on an advisor’s desk are well behind us and it is those who can bring differentiated solutions, including unique product, that will excel in this new more virtual world.

Sales and marketing have always gone hand in hand. While marketing has largely been more digital for some time, sales is now meeting that with a much broader use of data to identify specifics like communication preferences, vehicle and product usage and much more. This allows for far more targeted efforts leading to an overall better engagement. Business intelligence has become one of, if not the, most important aspect of a distribution strategy.

Its natural to look at this and think distribution is increasingly complicated and you’d be right. It is getting more complicated and going from zero to $100 million is getting harder by the day. But its not unattainable. There are a lot of examples of great success stories. Successful new ETFs from large and small issuers alike. Is there some amount of good timing and a bit of luck? Certainly but look close and you’ll see at least some aspects of what we’ve talked about here.

More hybrid sales teams bringing relationships along with smarter, more data-driven, targeted marketing and sales approaches. You have to stand out in the crowd, not just with a great product and a compelling story, but with resources, knowledge and support. Thepandemic didn’t cause this change but instead simply accelerated what was already upon us and those changes are here to stay.

Jillian DelSignore will be moderating a session on the 'Biden Effect and Themes to Watch in 2021' at Inside Wealth Virtual, April 26-28, 2021. 

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