In his role as senior portfolio manager at Portfolio Design Advisors Inc., an RIA in Centennial, Colo., Wes Strode oversees the Axiom investment platform. This platform is available to financial advisors who prefer outsourcing their investment management and operation activities, and is designed for RIAs of all sizes whether they are a hybrid or standalone RIA. Its primary clients are advisors at the broker-dealer Geneos Wealth Management Inc., which is PDA’s sister company.

There’s roughly $2.5 billion on the Axiom platform, which has over 100 different models from various money managers—including large providers such as DFA and BlackRock—that advisors can choose and blend together. PDA contributes its own investment models to the platform, many of which rely on exchange-traded funds that span both broad exposures and target niches.

We recently spoke with Wes Strode, senior portfolio manager at PDA, about how his firm employs ETFs in its investment models.

FA: What are the different flavors of PDA’s investment models?

Strode: On the one hand we offer low-cost, risk-based model funds that cover all of the major asset classes for the lowest possible cost—internal costs on those investments are usually around eight to 10 basis points. We also have more specific niche models such as our ETF dividend payer model comprised of higher dividend-paying ETFs. Then we have a couple of stock portfolios, as well as some actively managed mutual fund risk-based models. In addition, we have some pure ETF risk-based models.

We run five different sleeves of risk-based models ranging from conservative to aggressive. The models consist of a core-and-explore approach. The core segment is comprised of large, low-cost ETFs for broad exposure such as the Vanguard Total Stock Market ETF (VTI) and the Vanguard Intermediate-Term Bond ETF (BIV). For the explore part we invest in areas where we see value; often this results in allocations to niche products such as factor ETFs or an ETF that tracks a subset asset class such as a fallen angels ETF or a frontier-markets ETF.

FA: How is your dividend-paying model constructed?

Strode: A lot of advisors and their retirement-age clients still have the mindset of withdrawing 4 percent a year from retirement assets in the form of interest or dividend payments so they don’t have to touch the principal. As a result, we decided to create a higher-paying model using ETFs. We use everything from preferreds and high-yield bonds to higher-paying equity ETFs such as pipelines.

It’s 100 percent ETF-based. It’s similar to a 50/50 model where we have about 50 percent in fixed income, and the rest in higher dividend-paying equities. Overall, the model has consistently yielded over 4.5 percent.

FA: What are some of the funds used in this model?

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