New England Private Wealth Advisors LLC is a fee-only registered investment advisory firm in Wellesley, Mass., that provides customized wealth management services for individuals, families and institutions with greater than $2 million in assets. Like a lot of financial advisors, the firm’s CEO, Ira Rapaport, has been incorporating exchange-traded funds into client portfolios to address a variety of needs. While some advisors stick to core, broad-based index tracking ETFs, Rapaport’s firm believes that thematic ETFs can hit the spot in highly customized portfolios.
Schlegel: What kind of ETFs do you use in client portfolios?
Rapaport: Our overall investment strategy incorporates the use of both active and passive strategies. Within passive investments selected for client portfolios, we may utilize traditional market-cap-weighted ETFs, equal-weighted strategies and/or investments that focus on other factor-based methodologies. In addition, we may select thematic investments specializing in areas such as health care, infrastructure, robotics and/or other technologies.
Schlegel: What is your firm’s investment philosophy when it comes to building portfolios?
Rapaport: We take a long-term strategic approach. Each client is unique when it comes to goals, objectives, time horizon, tax considerations, liquidity constraints and other considerations. We therefore create custom portfolios utilizing both active and passive investment strategies. Many of our clients have acquired significant wealth, so we have found it important to continuously focus on risk-adjusted returns and preservation of wealth.
ETFs are an important tool within our client portfolios, especially within taxable accounts. We believe ETFs have several attractive attributes, including tax-efficiency, transparency, liquidity and low expense ratios.
In order to complement ETF investments within a portfolio, we may allocate a portion to a balanced or tactical manager. This could be in the form of an active mutual fund where the management team can navigate several different asset classes. This enables a portion of a portfolio to be flexible. If we have conviction about a manager, we want to provide them more autonomy to make shifts to asset classes, sectors or geographies that they may find more attractive at any given time.
Schlegel: When did your firm start using ETFs, and how has that grown in your practice?
Rapaport: I founded New England Private Wealth Advisors in 2005. At that time, clients’ portfolios had a minimal allocation to ETFs. Over time, as the ETF industry has grown, both in assets and investment opportunities, ETFs have become an increasingly larger part of our client portfolios.
We have primarily utilized ETFs within the equity component of client portfolios. This has been mostly in U.S. exposure; however, we do also use international ETFs as well. Within fixed income, we have typically invested with active managers rather than fixed-income index ETFs.