KEY TAKEAWAYS
- Advisors may be able to improve tax efficiency, lower costs, and still maintain exposure to higher quality companies in their clients’ portfolios by replacing more expensive, underperforming active managers with a factor ETF like QUAL.
- Since its launch in July 2013, QUAL has historically outperformed its Morningstar peer group and has had top decile performance over the trailing decade in its Morningstar category.
- Aside from being cheaper than 99% of its peers when looking at expense ratios,1 QUAL has also provided strong exposure to quality stocks.
Advisors play a pivotal role in helping their clients achieve their goals through prudent portfolio construction and thoughtful analysis. Conducting thorough due diligence of ETFs and mutual funds requires understanding a portfolio manager’s investment process and philosophy.
One additional area where advisors can add value for their clients is ensuring their investments are tax efficient. As we enter the 4th quarter, now is a great time for advisors to monitor their funds from a tax perspective so they are not blindsided with capital gains distributions. It may also be a good time to consider investing uninvested cash into higher quality companies that may provide higher expected returns.