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Kevin O’Leary Enters the #ETF Shark Tank; DFA Too!


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I woke up this week to a fun tidbit in my inbox delivered by my friends at KCG. In the morning ETF note, the writers broke the news (to me, at least) that Kevin O’Leary and his amazing marketing machine were debuting the first of what seems to be several ETFs from the Shark Tank personality.  Reports are that the new ETF traded nearly 345,000 shares on day one and has $5 million in assets.

From a third-party perspective, O’Leary has seized the uptrend of popularity in ETFs and paired that with his formidable marketing footprint that includes, but is not limited to, his role on Shark Tank, his recurring commentary slots on CNBC and a significant social media presence.   This surely will be a great case study to examine whether a great marketing machine can/should come before a good investment product idea – or if the marketing success of an ETF is a function of the quality of the product. 

While the average investor was likely more aware of the debut of O’Leary’s ETF, a more impactful item to most industry insiders was the news that Dimensional Fund Advisors – a titan of a firm built on its commitment to exclusive distribution via trained and approved advisors – has entered into an agreement with John Hancock to launch ETFs.  According to the statements, these ETFs will only be made available inside insurance and investment products packaged by Hancock.   But, to me, it isn’t about DFA getting into ETFs (after all, that is really a small leap from mutual funds), but moreso about the fact that DFA will have a new avenue for distribution that didn’t exist before.

Anyone who follows investment marketing knows that distribution is a fundamental for long-term success.  

DFA has long counted on the maintenance of a tribe of trained advisors who loyally allocate client dollars to DFA’s relatively low cost fundamental index investing approach.  Until recently, the financial advisor distribution model for retail investments had very little threatening its standing. However, there has been enough noise being made my upstart robo-advisors that custodians and broker-dealers have advanced their own direct to consumer offerings.  That has left DFA to ponder their future.

Give them credit in addressing this disintermediation of the financial advisor by aligning themselves with another investment product that most investors can ill-afford to forgo: life insurance.  The partnership with John Hancock is an acknowledgement of the trend and positions DFA to remain relevant, whether or not their traditional financial advisor sales force remains relevant in the ever-changing world of financial services.

So, take the news headlines at face value or dive deeper to see what they are really telling you. ETFs are not a fad, they are now the representative of the industry establishment.  DFA didn’t decide to get into the ETF business for ETFs’ sake alone, rather they used the move to diversify their distribution.

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