Three might just be a crowd.

The iShares Nasdaq 100 ETF (IQQ), launched by BlackRock, is expected to begin trading as early as today. With the new wrapper, BlackRock joins State Street, which introduced a similar fund two weeks ago, in competing with Invesco’s QQQ, long the only exchange-traded fund tracking the index. Now that three asset managers are offering nearly identical funds, advisors have a bevy of options for exposure to the index and its newest entrant, the aerospace and AI giant SpaceX. For many, the choice may come down to fees and brand recognition, but experts agree that Invesco certainly has the incumbent advantage.

“The Qs are, outside of SPY, probably the second-most famous, most well-known ticker,” said James Seyffart, a senior analyst at Bloomberg Intelligence. “That’s still what most people and traders are going to use for their exposure, but for long-term, buy-and-hold investors and advisors, they’re going to be seriously considering these other products.”

Q-ing Up Competition

Fees are among the main differences between the funds. For investors looking to gain new exposure to the Nasdaq, choosing a fund with a lower fee could make sense. But for those who already hold QQQ, or Invesco’s lower-fee index offering QQQM, a difference of a couple of basis points probably won’t be enough to move the needle, said Athanasios Psarofagis, an ETF analyst at Bloomberg Intelligence. “Let’s say all these launched at the same time, then I think the price would matter,” he said. “But trying to come in and go head to head with a product that’s so well established, it’s just harder.”

Fees for each Nasdaq-100 ETF are as follows:

• Invesco’s QQQ has the highest fee at 0.18%. QQQM’s fee is 0.15%.
• BlackRock’s IQQ will cost 0.12%, but the issuer is offering a waiver that brings the fee down to 0.10% through the end of next July.
• State Street’s SPDR Portfolio Nasdaq 100 ETF (QNDX) has the lowest fee at 0.10%.

BlackRock’s fee waiver has raised some eyebrows in the analyst community. “I don’t get what their approach is to try to do this temporary waiver, and then go back up to 12,” said Psarofagis. “Just come in at 10 basis points, like State Street did.”

All About LiQQQuidity. Invesco’s fund may cost more, but it also has more liquidity. “As the cornerstone of the Nasdaq-100 ecosystem, a half a trillion dollars of options are tied to QQQ, offering deep liquidity that will be difficult to displace,” Brian Hartigan, Invesco’s global head of ETF and Index investments, said in an email.

That liquidity matters, especially for institutional investors and short-term traders, said Bloomberg’s Seyffart. “You’re not even going to be considering these other ones, despite the lower fee.”

It’s open season on private markets.

A new proposal introduced last week would recognize clients working with advisors as accredited investors and potentially give millions more Americans access to private equity, private credit and other alternative investments, previously reserved for institutions and wealthy individuals. The Informed Investor Access Act, introduced by Rep. Troy Downing (R-Mont.), fits neatly with a broader push by the Trump administration and congressional Republicans to expand access to private markets. “Building wealth should not be reserved only for those who are already wealthy,” he said in a statement.

But many advisors see a catch: More investor choice could also mean more liability and more opportunities for clients to get hurt. “Just having an advisor doesn’t make you qualified,” said Tara Unverzagt, president of South Bay Financial Partners. “Your advisor is very possibly not qualified to help you with private investments any more than you are.”

Gotta Give ‘Em Accredit

At present, an individual accredited investor has to have a net worth of over $1 million or make more than $200,000 a year consistently, according to the SEC, to gain access to more sophisticated investments like private funds. However, some Americans already technically have stakes in private equity because they’ve started their own business or funded the launch of one owned by a friend or family member. Do they need protection from investing in a private equity fund? “The question comes down to who should have the right to take risks in their investments,” Unverzagt told Advisor Upside. Still, those positioned to take higher risks don’t always choose to do so:

• About 13% of the US population qualify as accredited investors, primarily based on net worth, according to the Financial Planning Review from CFP Board.
• However, less than 5% of those millions of people report owning private market securities.

From Enron and the 2008 financial crisis to Bernie Madoff and the 2023 regional bank failures, many Americans have become less willing to let traditional financial institutions decide what they can and can’t buy. “Investors have seen too much corruption and fraud on Wall Street, and they want to be able to make their own decisions,” said veteran securities lawyer Bill Singer, who expects some version of the legislation to eventually pass.

He also sees downsides. Private investments can be lucrative for advisors, but they also invite scrutiny. “We’re seeing an increasing amount of lawsuits involving private investments,” he said. “That means advisors would get sued, too.”

Wouldn’t It Be Nice? Not everyone thinks broader access solves a real problem. Alvin Carlos, a CFP with District Capital Management, argued that a diversified, low-cost portfolio focused on public markets is more than enough to build wealth. He added that his clients, mostly in their 30s and 40s, aren’t clamoring for private assets. “That said, someday, it would be nice to have a low-cost private equity ETF or something like that,” he told Advisor Upside.

Ever hear of too much of a good thing?

Years of strong stock market returns have created an unexpected challenge for advisors using separately managed accounts. It has become harder for direct-indexing strategies to generate the tax losses that underpin much of their appeal, said Eddie Bernhardt, head of SMAs at Invesco. But an innovative strategy is gaining popularity. Maintaining both long and short positions on stocks, opening up additional opportunities to realize tax losses in different market environments.

Here’s how it works: In a rising market, short positions can generate tax-loss harvesting opportunities when those stocks move higher. Conversely, long positions can generate harvestable losses as stock prices decline. “You’re generating realized loss potential in various markets, and you’re extending the life of loss generation in a portfolio,” Bernhardt said. While asset managers say the approach can help wealthy clients offset gains from concentrated stock positions, advisors caution such strategies add complexity and aren’t a substitute for comprehensive tax planning.

Cover Your Losses

SMAs are particularly useful for high-net-worth clients with concentrated stock positions or expecting a large taxable event. Consider the recent wave of wealth created by SpaceX’s public debut. Many current and former employees suddenly found themselves with millions of dollars tied to a single stock. Selling all those shares at once could trigger a major tax bill. An SMA allows advisors to gradually diversify those positions over several years, while using harvested losses to offset realized gains.

However, advisors say market conditions can limit the effectiveness of traditional direct-indexing SMAs. Jon Hsu, founder of TrueVector Wealth Advisors, said clients with highly appreciated technology stocks were unable to diversify as quickly as expected because a prolonged bull market generated fewer tax losses than anticipated. One SMA generated roughly 15% in tax losses during its first year and about 5% annually thereafter. Although Hsu explored long-short SMAs because they can generate losses for a longer period, he ultimately worried about leverage costs and the expense of unwinding the strategy. “Planning an exit strategy from an SMA is something that advisors rarely discuss with clients,” he said.

The use of traditional SMAs has surged in recent years:

• Today, SMAs hold about $4 trillion in assets, according to Cerulli data.
• Also, roughly half of advisors report using SMAs.

’SMAtter with You? Matt Chancey, founder of Tax Alpha Companies, said SMAs can produce meaningful tax savings, but work best as one piece of a coordinated plan involving advisors, CPAs and estate attorneys. “The tax alpha isn’t in the product,” he said. “It’s in the coordination around the product.”