1. The ETF Industry’s Biggest Problem, and How to Fix It

    The ETF Industry’s Biggest Problem, and How to Fix It

    Exchange-traded funds have been hailed for their accessibility, transparency, and, above all, low costs. But the way in which investors are actually able to buy and sell ETFs—and at what cost—runs counter to their promises.

    Even the word the industry uses—distribution—obscures the process: ETF providers have to get their products in front of investors, whether that means via a discount brokerage aimed at individuals and registered investment advisors, or on the platforms offered at big wealth managers, or through any other means of institutional trading. How do ETF providers get on these platforms? They pay.

    This ...

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    1. The gatekeeper's job is to identify and confirm the quality of the product being considered for inclusion.
    2. Investors looking at a set of commission-free ETFs on any platform need to know that issuers pay to be on there, so they may not necessarily be looking at the best or even the cheapest option.
    3. Without distribution, you can't sell your products.
    4. Maintenance and market access are fundamentally software problems that can be solved with almost no money. We know this from the success of robos and fractional shares.
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