Jim Wiandt is the founder and CEO of IndexUniverse: In this interview, Rob Ivanoff caught up with Jim Wiandt during the Inside ETFs 2013 conference in Hollywood FL. Mr. Wiandt is the head of a publishing organization which includes the Journal of Indexes, IndexUniverse.com, ETF Analytics, Inside ETF events, and some upcoming offerings. A writer, an adventurer at heart, and a publisher by trade, this well-spoken and witty man has great understanding of the exchange-traded funds (ETF) industry.
What are the main challenges facing the ETFs industry, at the Inside ETF conference in FL?
What I heard come up a lot is what we have heard for years: education. There is still a gap between the knowledge of the end investor and the level of sophistication of some ETFs, and this can taint the vast majority of ETFs, that are very much what you see (and what you think you see) is what you get. Again, from an investor perspective, it is a good problem, because there are more efficient ETFs in more places than ever before, and increased competition will continue to drive that.
In 2009, you wrote a blog post asking “Is active trading the real story behind the ETF boom?” What is the real story right now?
Well I think there is just a huge mix of many different kinds of investors in the ETF market. There are large institutions using ETFs as placeholders, high frequency traders and hedge funds trading, tactically focused advisors and retail making bets on market segment, and investors of the most boring sort, focused on smart asset allocation, broad diversification and efficient access to markets. At this point everyone -- from grandma to hot-rodding traders play a big role in the ETF market.
Jim, you travel between Europe and the U.S. and have a great grasp on advances in both markets. What is your advice for U.S. asset managers looking to expand their fund offerings abroad? What good strategies and market opportunities exist for them?
I think it is very very tough. There are so few examples of native-based US companies (especially in finance) who have done very well in Europe. There are two primary reasons for this. One is that distribution is so closed and so nationally focused in Europe. There really is a lock, by and large, by national banks over their home countries, particularly for retail, but even at an institutional level. The other issue is cultural and knowledge. A US approach will not work in Europe. You need to understand local culture, regulatory regimes, distribution mechanisms, tax structures, etc. to have a chance to succeed. I do think there are still HUGE opportunities in Europe and that the European advisor and retail markets for ETF is nascent and will boom.
What innovations and initiatives should we expect from Index Universe in the future? In addition to your conference business, you guys recently launched indexes. Do you see this as part of a future strategy?
We'll continue to build new products wherever we think we can do something very well and where there's a place both in the market and in our business model for it. I think you'll continue to see the depth and quality of our analytics business in particular deepen. Indexes at this time primarily support our analytics platform as benchmarks.
Jim, you started your own business. What is your advice to every advisor and asset manager starting in the business?
First, know that you love what you do and respect the people you work with and work for. Second - be ready to give EVERYTHING you have to your business, your passion, be ready to bleed into it, to scratch and claw your way to success. Having your own business can be very tough, but it's enormously liberating and if you really are doing what you love, I strongly believe that most people can find a way to make it work with drive, heart and perseverance. Having good friends and supportive family and finding a balance can all help as well. I've been lucky to have been in a great industry with lots of quality people and to have surrounded myself with extremely talented people who really do love what they do. When it's fun for everyone, that's when you know you're doing something right.
What is your outlook on active ETFs versus passive?
The jury has been out on active ETFs for many years. Right now they are hardly a blip in overall ETF assets. It does appear that because of the relentless flow of assets from traditional mutual funds into ETFs, that more big traditional active managers are looking seriously at the ETF market. There are reasons they've been reluctant to really embrace it, most importantly a fear of cannibalization to lower fees and disintermediation of their investors to the secondary market. But I do really think it's an instance - and the history of capitalism is littered with them where you either join in or get left behind.
Jim, you featured Brian Cashman from the Yankees as one of your main speakers; how can we apply his lessons to the ETF industry?
Well, put your nose down, work hard and strive to be the very best in everything you do. If you couple that with skills and surround yourself with good people, you should do OK. Of course the Yankees have done more than just OK in Cashman's tenure. I liked his understated manner and his focus really just on competence.
How do you expect the advisory business to change -- in the next 10 years?
Well, one big trend we're seeing for sure is the rise of so called Third Party Managers (TPMs) who build baskets of ETFs. Some of these managers are very very good - institutional caliber investors focused on exposures and risks. And others are the cowboys who charge too much and have a gamblers mentality. But they'll continue to grow. More and more advisors and retail investors will be looking at the market in terms of exposures instead of who the best active managers are and what the best stock picks are. That is the major trend that ETFs have driven that is a sea change in investing mentality.
Your Inside ETFs events have grown into one of the most prestigious industry gatherings. How can fund firms materialize their goal of reaching advisors at this event?
Well above all, of course, spend time with the advisors, and take the time to understand their needs and their businesses. The best issuers, like the best businesses in general really listen to the market and build to meet it.
In summary, Jim, what would you like to tell the readers of the ETF Business Review today?
I love where our business is at and I could not be any happier working in the ETF industry - which is dynamic, every changing, always interesting, and as I said full of individuals who genuinely are focused on quality and investor interest. It's been great to be a part of a movement that has greatly benefited investors. And we'll continue to push to see more investors better invested in better products. If we do that, we're doing our job and our business, and the ETF business will continue to grow for many years to come.
Rob is the editor of the ETF Business Review, intelligence for asset managers.