How ETF Issuers Can Use AI to Target New Strategies

If product distribution is like a party, RIAs are the body-guarded celebrities in the corner. Getting through might be tricky.

Combine that with record numbers of ETFs hitting the market, including nearly 100 new strategies in October alone, and distribution and marketing are more important than ever for issuers trying to stand out. Targeting methods that rely mostly on firm size just don’t cut it anymore, according to AdvizorPro’s latest report, which focuses on how issuers can grow AUM. Innovative new methods — from artificial intelligence to scouring regulatory filings — may be required to find firms worth reaching out to in the future.

“Any other company, whether it’s software, whether you’re selling trinkets, you need to advertise,” said AdvizorPro’s Hesom Parhizkar, who contributed to the report. “The biggest deal now [for issuers] is, you need to advertise to the right people.”

Scraping the (Internet) Barrel

One way issuers can identify the RIAs most likely to be receptive to their pitches is by first identifying whether they invest in products similar to an issuer’s existing lineup. Some platforms use AI to find firms with “competitor” funds — products with a similar strategy to the searcher’s — as well as gauge the amount of assets dedicated to particular ETF categories, from high-yield bonds to covered calls. But identifying these firms is only step one, Parhizkar said. “You can’t just make a phone call and say, ‘I have an awesome ETF.’ ‘Beautiful. Here’s a million dollars.’ It doesn’t work that way,” he added. “It’s phone calls, it’s emails, it’s marketing, it’s in-person meetings. There’s a multi-pronged approach after you find out who is literally at play here.”

Other ways issuers can find relevant RIAs, according to the report, include:

• Targeting multi-advisor teams that function as a single buying unit;
• Mapping RIAs by metro area, ZIP code or region;
• And incorporating advisors’ personal interests into outreach emails.

Prime Target. An issuer with a new defense tech, for example, might use AI tools to search for RIAs investing in that sector and then craft a sales pitch around how the fund could be incorporated into a firm’s existing models. Quarterly data can also help: If it shows rising advisor interest in a given area or thematic, issuers should tailor their outreach accordingly, Parhizkar added.

“If you go onto an RIA’s website, there’s probably an investment strategy, and they might mention long, short, they might mention tax-efficient,” Parhizkar said. “What you don’t want to do is try to market to everyone in America.”