Why holistic advisors have embraced single-ticket solutions

Firm believes growth in ETF suite tallies with a move away from individual funds and stock picking

Why holistic advisors have embraced single-ticket solutions

GameStop’s shares whiplashed dramatically again over the past few days in another see-saw performance. Whether directly involved or not, the performance of these so-called “meme stocks” has served as a reminder of what a volatile investment experience looks like, and it’s not pretty.

Vanguard’s single-ticket solution ETFs, which have just past their three-year anniversary, represent the anti-thesis of the recent single-stock phenomenon. Instead of focusing on one theme, region or asset class, these products pack a globally diversified portfolio covering both stocks and bonds into a single fund.

Each of the three offerings cater to different risk appetites. The Vanguard Conservative ETF Portfolio (VCNS-TSX) has a 40/60 mix of stocks and bonds, the Vanguard Balanced ETF Portfolio (VBAL-TSX) has a 60/40 mix and the Vanguard Growth ETF Portfolio (VGRO-TSX) is 80/20.

Tim Huver, head of sales, told WP they combine the Vanguard’s principles for investment success - long-term time horizon, broad diversification and, at a charge of 25 basis points, cost-effective implementation.

He said: “We find that many advisors are using this as a scalable solution for lower-balanced accounts. They are using it for core satellite portfolios where it forms the foundation of the portfolio, but then they can explore or build around the asset allocation ETF.

“Most recently, advisors are using the portfolios for cash equitization. Cash is coming in, maybe there's conviction in the broad equity markets, maybe not individual names, and they want to move away from individual stock picking. So, they use an asset allocation ETF to invest in the broad equity markets globally.”

As the fastest-growing segment of the market, Huver believes advisors are being drawn to its versatility. He also believes the growth of single-ticket solutions has moved in tandem with a shift away from fund and stock picking towards holistic financial planning and wealth management principles like estate, tax, and family legacy planning.

Vanguard is seeing that growth gravitate most towards the portfolios with more equity weighting, which might reflect a general belief in the market and the fact many people have been saving money this past year and have more to invest. The firm also recently launched its one-ticket retirement income ETF, and has two other single-ticket solutions - the Vanguard Conservative Income Portfolio (VCIP), which has an 80% bonds and 20% equities weighting, and the Vanguard All-Equity ETF Portfolio (VEQT).

Huver added: “These products fit very nicely into that construct, where advisors are then able to use these as that core, and then really focus their time elsewhere. Across the advisors that we're speaking with, we are seeing that trend - less stock picking, fewer funds and ETFs being used, and advisors looking more towards asset allocation and a holistic offering.”

Described as “outwardly simplistic, but inwardly sophisticated”, Huver said the rebalancing is global in terms of diversification, and is under taken by Vanguard’s fixed income and equity teams across three time zones. Leveraging that global scale is critical the success of these ETFs.

Rather than leave investors open to wild swings in the market, its suite of single-ticket offerings provide a portfolio constructed of uncorrelated fixed income and equities to not only capture upside but also protect on the downside. Overweighting different segments of the market is not the goal, which is to provide investors with a “smooth ride”.

Huver said: “With the likes of GameStop and AMC, coming out of that market may have created a level of fear for some investors. Maybe there is conviction in individual names but that's not a place where most investors are comfortable. These products just provide that strong core of a portfolio.”