Morningstar Advisor - August/September 2011 - (Page 47)

sure that we’re meeting the needs of the advice channel through the depth and breadth of the investment capabilities we have. But also I think what’s happened over the years—and I think importantly—is the movement of [us asking], How do you help advisors be successful? At one level, it’s understanding our investment-management capabilities and how should you expect them to perform in different markets. But it’s also trying to be very, very thoughtful with advisors and understanding what their needs are. Everybody has relative strengths, and understanding the relative strengths of the different advisors is very important. I think investors are vastly better off than they were 10, 15, 20 years ago. Bill McNabb: We have served independent advisors change from transaction-based to fee-based, the big “Aha!” for us was: How would advisors react if we treated them the way we treat many of our institutional clients? For that constituency, our goal is to offer high-quality, low-cost investments. Obviously, indexing is an important part of that, but not the only part. Could we bring the same to the advisor market under these new rules of engagement? Treating advisors like institutions for us meant more than just product. There is the critical element of service, in terms of helping advisory firms achieve their goals, build robust client bases, and serve their end clients extremely well. We also have a tremendous depth of research. The advisor community is really, really hungry for ideas. We’ve had considerable success in sharing with advisors our various research pieces, and having them make use of them for building up their own practices and assembling portfolios for their clients. I agree with Marty: This overall development is very good for the end user of the service, in that there’s much more focus on transparency on the product side as opposed to the advice side. Where we’re having the most success is with advisors who really want to be clear, saying, “This is what you’re paying me for, and this is what the underlying cost of the product is.” In those situations, the total cost, if you will, to the end consumer is pretty important. That’s where Vanguard helps the equation. Flanagan: The investor is so much better off advisors for more than 25 years, but it was a relatively small segment of the marketplace. As we began to see the business model for because the sophistication across the spectrum has gone up quite dramatically. You’re seeing the likes of CFAs in the field matching off against the advisor channel. And, by the way, many of the independent financial advisors are CFAs themselves, and Certified Financial Planners. I think that’s a great thing. MorningstarAdvisor.com 47 http://www.cffpinfo.com http://www.cffpinfo.com http://www.MorningstarAdvisor.com

Table of Contents for the Digital Edition of Morningstar Advisor - August/September 2011

Morningstar Advisor - August/September 2011
Contents
Contributors
Letter From the Editor
Simplicity and Design Matter
Do You Use ETFs Strategically or Tactically?
The Institutional Way
How to Analyze an ETF
Eyeing ETFs’ Next Chapter
Small-Cap/Large-Cap Flip-Flop?
Four Picks for the Present
Investment Briefs
Morningstar Investment Conference
Pitfalls of Peer Groups
A REIT Recovery, With a Catch
Turning Fund Distribution on Its Head
Here Come ETF Managed Portfolios
Circle These Picks Amid the Crop of New ETFs
ETF Analyst Favorites
Beware, the Accidental Portfolio Manager
It’s the Destination, Not the Vehicle
New Growth, Rooted in Experience
Better Ways to Look at ETFs
How to Better Manage Your Clients’ Future(s)
More Bargain Than Bubble
Cheap, Local, and On a Roll
Mutual Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
First-Quarter Assets Hit an All-Time High
You Say You Want a Revolution?

Morningstar Advisor - August/September 2011