The exemptive relief process has really allowed for the growth of ETFs. Many of the ETFs coming to market now are active ETFs versus passive ETFs. One of the latest versions of active ETFs, NextShares by Eaton Vance, launched earlier this year. This will lead to a number of fund sponsors applying for similar exemptive relief.
I think that while regulation has hindered some innovation, the industry has always welcomed innovation as a result of proactively pushing for rule changes and relief and responded by creating a variety of new products as a result.”
Bill Hortz: Let me throw out this question: What do you think could be a game-changer that the industry needs to be aware of and plan for?
Bob Dorsey: It’s going to definitely be technology-driven. So much of what has changed since I’ve gotten into the industry in the last 30 years has been technology. The technology has been about delivering new products and services, the fund groups got better with technology and as technology evolved they developed better websites with better tools for investors. Schwab changed the game years ago with their OneSource platform of how investors and their advisors accessed mutual funds, and they then took that model and used their clearing firm, custody operations and their fund lists to become the back office to help fee-based planners and the independent broker-dealers.
Going forward, there’s technology and innovation that is helping financial advisors as well as competing with current financial advisors. Firms like Motif Investing and Hearsay Social’s Predictive Social Suite for Advisors are now available for financial planners and investors. In addition, many of the mutual fund platforms are creating more dynamically driven model portfolios, and the advent of robo-advisors is already upon us.
One final thought that is currently being discussed, and you may have seen some of these articles, but there’s a lot of discussion that firms like Google could ultimately be in the asset management business. They could change the way asset management could be delivered to individuals. Just think about all the analytics, the great technology that Google can deliver and especially new services to the ultimate investor. It could drive new competitive customer-engagement strategies we have not seen yet. And the threat is not just Google. Bill, there are firms out there who aren’t yet in the asset management or fund business who will be, and they will change the game just like Schwab and others changed the game 20 years ago. We need to be experimenting more on business model innovation and "customer experience" before these new competitors do.
Bill Hortz: Thank you so much Bob for your time and giving us some of your views on the industry.
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