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The ETF Innovation Boom: What’s Next for the Fastest-Evolving Corner of Investing? · Views from 6,230

• 0:10
  Ryan Nauman Host Views from 6,230: Welcome everyone eTFs have grown by leaps and bounds in recent years through innovation and different products.
• 0:19
  Ryan Nauman Host Views from 6,230: That growth has led to many hot trends impacting the space, including active ETFs, buffered or defined outcome ETFs.
• 0:26
  Ryan Nauman Host Views from 6,230: We have ETF share classes and the inclusion of private markets and much, much more.
• 0:32
  Ryan Nauman Host Views from 6,230: We could go on and on about the innovation there and the hot trends.
• 0:37
  Ryan Nauman Host Views from 6,230: I have on an industry expert to discuss these trends and what it all means for financial advisors.
• 0:45
  Ryan Nauman Host Views from 6,230: But first, this episode is sponsored by the award-winning Zephyr, which helps investment professionals make more informed investment decisions on behalf of their clients.
• 0:54
  Ryan Nauman Host Views from 6,230: All right, enough from me.
• 0:56
  Ryan Nauman Host Views from 6,230: I've already talked enough.
• 0:57
  Ryan Nauman Host Views from 6,230: You heard enough from me.
• 0:59
  Ryan Nauman Host Views from 6,230: So let's go ahead and bring on the star of the show.
• 1:02
  Ryan Nauman Host Views from 6,230: I'd like to give a very warm welcome to Steve Foy.
• 1:06
  Ryan Nauman Host Views from 6,230: Steve is the senior vice president of trading at Tidal Financial Group.
• 1:12
  Ryan Nauman Host Views from 6,230: Steve, thank you so much for coming on the show.
• 1:15
  Ryan Nauman Host Views from 6,230: It's an honor to have you on.
• 1:16
  Ryan Nauman Host Views from 6,230: Really excited about this conversation.
• 1:18
  Ryan Nauman Host Views from 6,230: We have a lot to cover.
• 1:19
  Ryan Nauman Host Views from 6,230: There's a lot to cover in the ETF space.
• 1:22
  Ryan Nauman Host Views from 6,230: So you can please tell us a little bit more about yourself and Tidal Financial Group.
• 1:28
  Steve Foy SVP of Trading Tidal Financial Group: Yeah, thanks Ryan.
• 1:28
  Steve Foy SVP of Trading Tidal Financial Group: Happy to be here.
• 1:29
  Steve Foy SVP of Trading Tidal Financial Group: Very grateful for the opportunity, and being called a star and an expert, that's...
• 1:34
  Steve Foy SVP of Trading Tidal Financial Group: so yeah, personally, I'm Steve Foy.
• 1:36
  Steve Foy SVP of Trading Tidal Financial Group: I've been with Tidal for two...
• 1:37
  Steve Foy SVP of Trading Tidal Financial Group: a little over two years in portfolio management and trading.
• 1:42
  Steve Foy SVP of Trading Tidal Financial Group: before that I was with Invesco and ProShares, so I'm becoming an ETF lifer.
• 1:45
  Steve Foy SVP of Trading Tidal Financial Group: We'll see.
• 1:46
  Steve Foy SVP of Trading Tidal Financial Group: So yeah, I've been super fortunate to be in that space.
• 1:48
  Steve Foy SVP of Trading Tidal Financial Group: I think everyone I've worked with in ETFs are just great, really focused on innovation and just a passion for investors.
• 1:54
  Steve Foy SVP of Trading Tidal Financial Group: So super grateful to everybody and just the opportunity.
• 1:59
  Steve Foy SVP of Trading Tidal Financial Group: to pivot out to Tidal, I think, Tidal's kind of a full stack ETF platform.
• 2:03
  Steve Foy SVP of Trading Tidal Financial Group: So it really is whatever investors or clients I should say, need it to be.
• 2:08
  Steve Foy SVP of Trading Tidal Financial Group: we have about 90 plus clients managing or servicing around 80 billion and we really just try to offer them whatever they need to get into the market.
• 2:17
  Steve Foy SVP of Trading Tidal Financial Group: Managing a portfolio and managing a security on a listed exchange are two extremely different things.
• 2:22
  Steve Foy SVP of Trading Tidal Financial Group: Like you mentioned, the pace of innovation and all that, we really help people get in fast, right?
• 2:27
  Steve Foy SVP of Trading Tidal Financial Group: And in the right way, right?
• 2:28
  Steve Foy SVP of Trading Tidal Financial Group: There's a-- plenty of potholes and areas to have missteps in ETF management, so we really pride ourselves on being the best and, helping investors and helping clients bring funds that really they're proud of and that they operate exactly
• 2:42
  Steve Foy SVP of Trading Tidal Financial Group: as they want them to.
• 2:44
  Ryan: That's awesome, Steve.
• 2:45
  Ryan: And based on everything that's going on in the ETF space, there's a...
• 2:49
  Ryan: I think we're in for the long haul here.
• 2:51
  Ryan: So if you're gonna become a lifer in something, it's probably good to be a lifer in the ETF space.
• 2:56
  Ryan: I think you made a good choice.
• 2:58
  Ryan: You made a good choice there.
• 3:00
  Ryan: So does Tidal, once they, like for example, they help a firm go live in a new ETF, do they continue supporting and helping that firm?
• 3:11
  Ryan: Or once they go live on an exchange, does it, the relationship stop there?
• 3:17
  Steve Foy: Yeah we have consulting where we'll help someone just come to market, right?
• 3:21
  Steve Foy: Help them and guide them through the process.
• 3:23
  Steve Foy: But I think our most traditional clients are, on our trusts or, have a deeper relationship than that.
• 3:29
  Steve Foy: They ultimately own their product and can manage it however they see fit.
• 3:33
  Steve Foy: But just to run through it of someone took us up on everything we'll do product development come up with ideas alongside them, that into a prospectus and SEC filings manage all the operational setup, the capital markets, those relationships
• 3:48
  Steve Foy: with market makers, do the trading, do administration operations, right?
• 3:52
  Steve Foy: I'm sure I'm leaving some of the great people I work with out, but really pretty much anything.
• 3:57
  Steve Foy: I...
• 3:57
  Steve Foy: We don't really see a lot of clients moving away or feeling like, "All right, I got this.
• 4:01
  Steve Foy: I'm gonna go out on our own," right?
• 4:03
  Steve Foy: 'Cause we try to make it super easy and to be, true partners, right?
• 4:06
  Steve Foy: A really deep relationship there.
• 4:09
  Steve Foy: so yeah, I think it's it's possible, but I think, it's nice to, for a client to be able to focus on what they're really great at, right?
• 4:16
  Steve Foy: And whether that's distribution, management, right?
• 4:20
  Steve Foy: We have clients who are just in coming up with great ideas and great investment decisions.
• 4:26
  Steve Foy: So whatever they want, right?
• 4:27
  Steve Foy: I think it's really nice for them to be able to have let us deal with the headaches
• 4:32
  Ryan: Yeah, that's fantastic, Steve, and we're gonna get to it shortly, but I'm sure you see some really unique products.
• 4:38
  Ryan: I would love to get your point of view.
• 4:39
  Ryan: We'll talk about it shortly, like I said, about some of these unique ones.
• 4:44
  Ryan: You come a- see some come across your desk that are like, "Oh my gosh, this one's unique."
• 4:50
  Ryan: But we'll talk about that shortly.
• 4:52
  Ryan: But let's just talk about the trends real quickly.
• 4:55
  Ryan: What are some of the biggest trends that you are watching closely?
• 4:59
  Ryan: There's a lot of them out there, Steve.
• 5:01
  Ryan: What are some of the biggest ones that you are currently watching that have piqued your interest?
• 5:09
  Steve Foy: Yeah, I think that's a question of how far do you wanna zoom out, right?
• 5:11
  Steve Foy: I think if you zoom out all the way, ETFs are really still the trend to me, right?
• 5:16
  Steve Foy: We had in the realm of over a trillion dollars of flow.
• 5:21
  Steve Foy: I, I don't wanna be all over stats, but I think I think it was, like, 1,200 launches last year of ETFs.
• 5:27
  Steve Foy: We were about 15% of those.
• 5:28
  Steve Foy: So just ETFs in general, right?
• 5:30
  Steve Foy: Just huge, right?
• 5:31
  Steve Foy: It's, I think there was under 100 mutual fund launches last year, for example, in comparison.
• 5:36
  Steve Foy: So that's just going, I think a lot of the reason for that is active, and active is a bucket if you really get into the legalese of it.
• 5:45
  Steve Foy: so ETFs for so long have just been synonymous with indexing, right?
• 5:49
  Steve Foy: That's just been how they started.
• 5:51
  Steve Foy: That was the story.
• 5:52
  Steve Foy: And in the grand history of investing, however many hundreds of years it's been indexing is still kinda new, right?
• 5:59
  Steve Foy: It's a relatively novel idea, and I know I, I can't go too long without reading how indexing is, gonna threaten capitalism or whatever it might be.
• 6:08
  Steve Foy: But it's still, it's, that's still kinda new.
• 6:10
  Steve Foy: So I think active is shifting us back towards maybe that traditional allocation of investing.
• 6:15
  Steve Foy: Some leading indicators for active, right?
• 6:18
  Steve Foy: It's definitely over half of the products at this point.
• 6:20
  Steve Foy: But I think only 20 per- 10% of the AUM or somewhere in that ballpark.
• 6:24
  Steve Foy: So the while, active is a track record, right?
• 6:28
  Steve Foy: Which is just such a different ballgame than it is for an index provider who just has a strict methodology.
• 6:34
  Steve Foy: They can backdate that forever.
• 6:36
  Steve Foy: So yeah.
• 6:37
  Steve Foy: Active is the biggest trend to me.
• 6:39
  Steve Foy: And again, that can mean a lot of different things.
• 6:41
  Ryan: Yeah, you're exactly right.
• 6:42
  Ryan: There's a lot of, more granular trends within it, but when you take a look at the big picture, it is just active ETFs.
• 6:50
  Ryan: I'm old enough to remember, Steve, aging myself here, whenever you think about ETFs, it was just vanilla plain index funds in a ETF wrapper.
• 7:02
  Ryan: You had the Spiders, VO, whatever it was, just try- passive.
• 7:08
  Ryan: Pa- whenever you thought of ETFs, you just thought of a passive investment vehicle.
• 7:13
  Ryan: Now that has changed.
• 7:14
  Ryan: It's flipped inside out, upside down, you name it, and now it is active ETFs.
• 7:21
  Ryan: And what's interesting to me I still can't get my arms around the fact that there are more ETFs out there than there are publicly traded stocks.
• 7:31
  Ryan: That Of just blows my mind.
• 7:33
  Ryan: And it makes me wonder, are we too much?
• 7:35
  Ryan: Is there a bubble there with ETFs?
• 7:37
  Ryan: But they keep coming out with new products, so probably not
• 7:42
  Steve Foy: Yeah.
• 7:42
  Steve Foy: No, and I think just to that point for a little bit, in terms of bubble, right?
• 7:45
  Steve Foy: I think there, there's been a, there's a bit of narrative there that indexing is certainly possible to create some bubbles, especially in these mega cap names.
• 7:54
  Steve Foy: But I think in terms of the ETF itself, right?
• 7:57
  Steve Foy: It's all passed through to the investors and to their ultimate holdings, right?
• 8:00
  Steve Foy: And if there is a bubble, if there's too much selection, I think that's a good thing, right?
• 8:04
  Steve Foy: I think it's really great for investors to be able to just, scroll the list of ETFs and maybe they have a thought in mind and they wanna know if a product is out there.
• 8:12
  Steve Foy: And I think more times than not, they're gonna find exactly what they're looking for
• 8:16
  Ryan: Yeah.
• 8:17
  Ryan: I think there used to be...
• 8:18
  Ryan: Wasn't there a meme for that or something where it's oh, there's a meme for everything?
• 8:23
  Ryan: Now there's an ETF for everything.
• 8:25
  Ryan: Whatever, how niche you want it to be or specific, there's chan- there's probably an ETF for it.
• 8:31
  Ryan: So you're exactly correct on that.
• 8:33
  Ryan: I'm a big fan of democratization of investing, especially when it comes to bringing institutional style strategies to retail investors who 10 years ago didn't have access to those strategies.
• 8:47
  Ryan: It helps better investment portfolios, and at the end of the day, that's what we're all here for.
• 8:53
  Ryan: So this growth in innovative ETFs, whether it's just active ETFs or buffered products or these single stock inverse triple levered products, however you wanna explain them, how has it been...
• 9:10
  Ryan: Has it been driven by issuers or is it the demand from investors that's really been driving that growth?
• 9:18
  Steve Foy: Yeah, when I think of like true innovation, right?
• 9:21
  Steve Foy: Something that's just never existed before, I think that's really the, issuers are lighting that spark, right?
• 9:28
  Steve Foy: They're the ones that are pushing the ball down the hill.
• 9:30
  Steve Foy: And then I really think the, the role the issuer plays is almost a vote, right?
• 9:34
  Steve Foy: They come in and they say what they like and they don't like, when, voting through their investment and their dollar.
• 9:39
  Steve Foy: So I think after that first wave y- people feel out what the products are.
• 9:42
  Steve Foy: They have some lifetime, some track record.
• 9:45
  Steve Foy: And then you see a really, what I would consider a really healthy market cycle where someone's-- something new comes along and then a wall of iterations comes behind it.
• 9:54
  Steve Foy: You're seeing that pretty much every day of the week you see something like that happening with a new style.
• 10:00
  Steve Foy: And from there on, the, the investors can direct what they like, what they don't like.
• 10:05
  Steve Foy: And then new is-- that offering just gets sharper and sharper.
• 10:08
  Steve Foy: But more broadly, I think, know, the difference between market innovation and ETF innovation is getting thinner and thinner.
• 10:15
  Steve Foy: It's probably all due to 6011 from the ETF rule in 2019.
• 10:20
  Steve Foy: I'm no legal scholar, but that, that really seems to be the launching point for all of this, right?
• 10:25
  Steve Foy: Spot boy-- spot Bitcoin ETFs is a great example after that.
• 10:28
  Steve Foy: So really at this point, I think anytime where I'd see the ETF wrapper maybe, struggle to meet the innovation of the financial market is like a new investment vehicle, right?
• 10:38
  Steve Foy: That takes time to figure out the settlement cycles.
• 10:41
  Steve Foy: It's just like a, the, the industry figuring it out.
• 10:44
  Steve Foy: So you know, seeing s- scenarios where the ETF filing exists before the market does and, I just think that's great to your point about the democratization of finance.
• 10:54
  Steve Foy: It's just delivering on that promise of, we're gonna give you what anybody could get no matter how much money they have.
• 11:00
  Ryan: Yeah, and that's fantastic too, because like I said, at the end of the day, it's all about creating better investment outcomes, financial outcomes for the end investor, and that's what the space is doing.
• 11:12
  Ryan: And even though there's some products I see that go way over my head, I have no idea what they're trying to do, what the investment objective is, as long it i- as, as long as it helps the end
• 11:25
  Ryan: investor and their investment objectives, I'm all for it.
• 11:29
  Ryan: So you mentioned active ETFs.
• 11:32
  Ryan: Obviously, that's the hottest trend right now in the space.
• 11:37
  Ryan: What segments of the ETF space are experiencing the greatest demand for investors?
• 11:43
  Ryan: I guess we have, buffered products, the...
• 11:47
  Ryan: or defined outcome products.
• 11:49
  Ryan: You have the private market ETFs.
• 11:52
  Ryan: You name it, there's a lot of different segments that are catching a lot of headlines.
• 11:57
  Ryan: What do you think is ex- experiencing the greatest demand from investors?
• 12:04
  Steve Foy: I think to me it's, I think you nailed it there with the, you mentioned defined outcome, right?
• 12:08
  Steve Foy: And again, that's a, a mushy bucket that can mean a lot of things, right?
• 12:11
  Steve Foy: I think you could put buffer in there, you could put derivative income products in that bucket as well.
• 12:16
  Steve Foy: So I think you see the biggest players in finance focusing there, right?
• 12:19
  Steve Foy: The JP Morgans and Goldman Sachs of the world, BlackRock of course, right?
• 12:23
  Steve Foy: Getting involved in that area and really been focusing on it for a long time.
• 12:27
  Steve Foy: But yeah, just in terms of that phrase defined outcome, I it's so refreshing, I think, for an investor, right?
• 12:33
  Steve Foy: Where, everyone knows the phrase, historical performance is not an indicator of future returns.
• 12:38
  Steve Foy: I think it's so nice to just be like, "Hey, I have this product, it's gonna do this," right?
• 12:43
  Steve Foy: And that's it, right?
• 12:44
  Steve Foy: I think we're just seeing the start of that, and there's a million different ways to give investors what they want and to figure out what they want.
• 12:51
  Steve Foy: So on a net, on net growth area that's definitely it.
• 12:55
  Steve Foy: I think the derivative income is probably leading the way in that space, but just giving investors really clear definition of a product that they're gonna have is really the trend I see right now.
• 13:06
  Ryan: Yeah, you're exactly right.
• 13:07
  Ryan: And if you I love that they're trying to, those products are trying to limit downside risk, because at the end of the day, I feel that's the biggest risk in investing.
• 13:17
  Ryan: Now, with that being said, I am a little bit concerned how these products really will react when we have a full market cycle, because we haven't.
• 13:24
  Ryan: A lot of these are newer products.
• 13:26
  Ryan: A lot of products look really good when markets are ripping higher every day.
• 13:32
  Ryan: What happens when we're down 20% with these products?
• 13:36
  Ryan: So it's a wait and see there.
• 13:37
  Ryan: Hopefully, they do what they're supposed to do and hold up well during those bear markets.
• 13:44
  Ryan: Within-
• 13:45
  Steve Foy: No,
• 13:45
  Ryan: Yeah
• 13:46
  Steve Foy: sorry.
• 13:46
  Steve Foy: to your point though, right?
• 13:47
  Steve Foy: We've been through-- Some of these have been through that, right?
• 13:50
  Steve Foy: So I do think that track record is getting there, but no, you're absolutely right there.
• 13:54
  Steve Foy: But the way the innovation goes, especially as an advisor, right?
• 13:57
  Steve Foy: You're, you gotta really have a lot of faith in these products and their management.
• 14:00
  Steve Foy: But I'm confident in the teams across the space
• 14:04
  Ryan: And you're exactly right.
• 14:05
  Ryan: The financial advisors have to have faith in the storytelling, the marketing a- and the advisors of these fin- of these products.
• 14:13
  Ryan: So y- you're spot on.
• 14:16
  Ryan: Also within the ETF space are thematics that have just really blown up recently, ver- they can be very niche thematics, like you said, just Bitcoin or maybe the Mag Seven or, just a sleeve of the AI, pie.
• 14:34
  Ryan: I- they've been very popular recently.
• 14:36
  Ryan: And like you said at the opening, these thematic ETFs, very niche, they allow investors to get, invest in parts of the market that maybe they weren't available five, 10 years ago.
• 14:50
  Ryan: What has been the primary driver of the growing popularity of these niche thematic ETFs?
• 14:59
  Steve Foy: I think I think you, you've, you hit on a couple points that really are the, the core to me.
• 15:04
  Steve Foy: When I think about thematic ETFs have been around for a while, right?
• 15:07
  Steve Foy: I think but these ones are different, right?
• 15:09
  Steve Foy: The, the latest thematic ETFs that are coming to market aren't yesterday's, where index providers are trying to cut closer and closer to a core investment thesis, right?
• 15:18
  Steve Foy: And I think that goes to active management again, right?
• 15:21
  Steve Foy: Where you're an active manager, you can really dial it in exactly what you need, right?
• 15:26
  Steve Foy: And I think thematics are getting more and more concentrated is probably the biggest trend, right?
• 15:31
  Steve Foy: Less and less securities in there until the space maybe grows out.
• 15:35
  Steve Foy: And that's just a better expression of what an investor wants, right?
• 15:39
  Steve Foy: As they-- if you have a very specific thesis or sentiment that you believe in the ETF issuers wanna get there, and especially with active management, I think it's easier than ever to do that.
• 15:49
  Steve Foy: And then, I don't-- I think we've gotten this far without saying AI.
• 15:52
  Steve Foy: That's just shifting everything to such a degree, right?
• 15:55
  Steve Foy: Markets and the economy.
• 15:57
  Steve Foy: Not only are thematics getting more concentrated, which equals more issuances and ways to approach it, but at the same time, the, the economy and the market are shifting in a pretty dramatic fashion, right?
• 16:07
  Steve Foy: So kind of new industries coming under AI are definitely leading the way in terms of that new thematic expression.
• 16:15
  Ryan: Yeah, and then with it, we've talked a lot about defined outcome already or the buffered products.
• 16:23
  Ryan: All within that are, derivatives, and the inclusion of derivatives and ETFs, whether they are there to, for risk management or there to e- enhance or juice the yields of some of these ETFs.
• 16:37
  Ryan: Their derivatives within these ETF wrappers are very popular for multiple different reasons.
• 16:43
  Ryan: Do you think investors and financial advisors have had a positive reception towards the new and sometimes they got exotic products that have derivatives and a lot of unique option overlays type products?
• 16:57
  Ryan: I'm assuming so because I'm seeing a lot of them
• 17:01
  Steve Foy: Yeah.
• 17:01
  Steve Foy: No, I agree.
• 17:01
  Steve Foy: I think the reception of the market and the statistics would say that yes, they are comfortable.
• 17:06
  Steve Foy: I, I-- it's definitely the strongest growth area in the space, but I, I wouldn't just wanna breeze past it with those numbers, right?
• 17:13
  Steve Foy: There's certainly a ton of nuance and one derivative product isn't like another, right?
• 17:17
  Steve Foy: Some are turning up leverage, other ones are diversifying, right?
• 17:21
  Steve Foy: Some are helping you get, uncorrelated returns in your portfolio.
• 17:25
  Steve Foy: So I think issuers are really getting the structure kinda sharper and sharper to where something that you might call exotic just because it has derivatives, is actually very predictable and a great fit in any portfolio.
• 17:38
  Steve Foy: So I think, yeah, I think there's still room to get more comfortable, for sure.
• 17:43
  Steve Foy: But the disclosure is there, the regulatory framework is there and, there's a great incentive structure to make sure that investors know and advisors know what's going on in the product and what to expect.
• 17:53
  Steve Foy: I think the, the reaction has been overwhelmingly positive, and I think it can only, get better from here
• 17:59
  Ryan: Yeah, I agree.
• 18:01
  Ryan: And you mentioned the, those exotic products.
• 18:04
  Ryan: Do some of them scare you?
• 18:05
  Ryan: When I see some that are single stock, triple levered, inverse, you name it, I...
• 18:13
  Ryan: to me, it scares me.
• 18:16
  Ryan: I don't think I could ever, if I was a financial advisor, put that in an investment portfolio, but I'm a little bit more on the conservative side.
• 18:23
  Ryan: Do they scare you on some of these very unique single stock, you name it, opti- options out there?
• 18:34
  Steve Foy: A-a-as a portfolio manager versus an investor it's a very different dynamic, right?
• 18:39
  Steve Foy: When we're managing products like that, it does take a different level of attention and robustness and process and risk and all that stuff to make sure that's operating in a safe manner, that investors are getting exactly what they're
• 18:50
  Steve Foy: looking for and paying for.
• 18:51
  Steve Foy: I think the track record is pretty strong there across the space.
• 18:54
  Steve Foy: Shifting to, to, I think the harder question is a-as an investor, know I find in-- there's a probably a broad narrative here that I think maybe underestimates the, the end investor or the retail investor might be the common
• 19:06
  Steve Foy: buzzword.
• 19:07
  Steve Foy: I think the regulatory framework is huge and robust, right?
• 19:10
  Steve Foy: The disclosures are there.
• 19:11
  Steve Foy: Maybe once upon a time, that was thought of as legalese, right?
• 19:14
  Steve Foy: Who's gonna read a prospectus, for example, might be something that you might hear, right?
• 19:18
  Steve Foy: It's easier than ever now to actually dig into those things, right?
• 19:22
  Steve Foy: Especially with AI.
• 19:24
  Steve Foy: You can really evaluate and get a comfort level, and not to mention that the track record is growing, the diversification is growing, the competition is growing, right?
• 19:31
  Steve Foy: I think, if that's what you want to invest in I don't think you should be scared of it.
• 19:35
  Steve Foy: I think they certainly require attention, right?
• 19:37
  Steve Foy: As you mentioned, the leverage products, those are designed for right, of defined performance.
• 19:43
  Steve Foy: That's...
• 19:44
  Steve Foy: find that writing everywhere, right?
• 19:46
  Steve Foy: So you definitely need to know what you're buying and investing in and I think to the ear-earlier point is there's less of an excuse to not do your homework, right?
• 19:55
  Steve Foy: You could drop a prospectus into a large language model and get a pretty good take.
• 20:00
  Ryan: That's a very good point, and a great use case for AI right there.
• 20:05
  Ryan: There we go, bringing up the AI word there for you, Steve.
• 20:09
  Ryan: It-- But you make a good point, is for every investor is different.
• 20:14
  Ryan: I would not include that in my portfolio, but younger investors, they probably would to try and ju- get some juice returns or income from those single stock, option overlay strategies.
• 20:29
  Ryan: But it all depends on the investor, the invest- investment objective, and their risk tolerance at the end of the day.
• 20:36
  Ryan: And do you think that ETF wrapper makes financial advisors a little bit more comfortable getting into some of these strategies?
• 20:45
  Ryan: Where ETF wrapper, it's more liquid.
• 20:47
  Ryan: If something does go wrong or the client needs to get out, they can.
• 20:51
  Ryan: That provides a little bit more comfort there for financial advisors when offering these exotic products.
• 21:00
  Steve Foy: Yeah, I think that's a kind of a, that's a challenge for the industry i-in terms of like just the menu's huge and the barriers of transition do not exist, right?
• 21:09
  Steve Foy: Today's hot product is not tomorrow's hot product for example.
• 21:12
  Steve Foy: From an issuer perspective, I think it's...
• 21:15
  Steve Foy: Or an advisor, sorry.
• 21:16
  Steve Foy: A, it's there's like an opportunity and an obligation, right?
• 21:20
  Steve Foy: The opportunity is the menu's never been bigger, right?
• 21:24
  Steve Foy: It's getting bigger by the day.
• 21:26
  Steve Foy: You really need to know what you're doing, right?
• 21:28
  Steve Foy: You really need to know the products and in terms of opportunity you need to be on, up to date, right?
• 21:34
  Steve Foy: Because you don't want to be in a scenario where someone finds a new product that they haven't been suggested and they, they maybe they go that their own way 'cause it's so accessible, right?
• 21:45
  Steve Foy: a-and then the obligation is just to make sure that it's right?
• 21:47
  Steve Foy: Your, your caution points that you mentioned.
• 21:49
  Steve Foy: I think that's really their job to help investors decipher all that noise, right?
• 21:53
  Steve Foy: A-and to work through those work through those risks and considerations to make sure it's right for their portfolio.
• 21:59
  Ryan: Education.
• 22:00
  Ryan: Education is a word I hear a lot when it comes down to a lot of these products.
• 22:05
  Ryan: Education, making sure the advisor knows about the strategy so then they can pass on, that information, that insight to the investor, so the investor knows what they're getting themselves into as well.
• 22:20
  Ryan: Very important.
• 22:20
  Ryan: So auto callables is another popular product.
• 22:25
  Ryan: So are private markets.
• 22:27
  Ryan: They tend to be as more on the illiquid side of the investment landscape.
• 22:34
  Ryan: How is that going right now, and do you think product innovation will overcome the liquidity issues when we're talking about private investments in an ETF wrap or auto callables?
• 22:46
  Ryan: Do you think we're getting to the point where we might get over some of these liquidity issues that we've seen in the past month with private markets?
• 22:56
  Steve Foy: I think I'll just say I really-- I like auto callables a lot, just personally.
• 23:00
  Steve Foy: I think it's a really great return profile for investors.
• 23:04
  Steve Foy: Know, just the growth in that area is strong.
• 23:06
  Steve Foy: I would honestly expect it to be a little bit stronger based off of the return, but I obviously, think about ETFs twenty four/seven.
• 23:13
  Steve Foy: We supported the launch of an auto callable funds with Vega shares, and I just again, I think the transparency is probably the hard point of auto callables, right?
• 23:21
  Steve Foy: It's, it-- If you look at the holdings it's a little bit more vague than you might see in terms of an equity fund or an index fund.
• 23:27
  Steve Foy: But yeah, they're, the...
• 23:28
  Steve Foy: I don't see too much a liquidity concern on auto callables for me.
• 23:31
  Steve Foy: I think that's more of like a disclosure game.
• 23:34
  Steve Foy: And then privates investments obviously on the heels of SpaceX.
• 23:38
  Steve Foy: I, I think there's definitely a lot of lessons learned there.
• 23:41
  Steve Foy: I, I wouldn't say too many warnings for the next round of mega IPOs that are gonna come to market.
• 23:47
  Steve Foy: But above all else, I just think it's really cool to, to have been able to log into your brokerage account and get access to SpaceX, right?
• 23:56
  Steve Foy: I think what a cool opportunity for the industry just stepping back.
• 24:01
  Steve Foy: And then the, the irony here is, the SPCX ticker was a SPAC ETF, right?
• 24:06
  Steve Foy: That was like a SPAC ETF.
• 24:08
  Steve Foy: Yes.
• 24:08
  Steve Foy: So SPAC investment was pretty much as close as you could get traditionally in a public market to private investment.
• 24:16
  Steve Foy: And the contrast of how that went this time versus SPACs, I think is pretty glaring, right?
• 24:21
  Steve Foy: I think ETFs have done a pretty good job of getting people fair access at fair prices to, to private investment.
• 24:27
  Steve Foy: Only room to improve there.
• 24:29
  Steve Foy: But yeah, there's a lot of...
• 24:30
  Steve Foy: Another area where there's plenty of regulatory burden to make sure that the liquidity is there, that you're not getting dislocations from NAVs and things like that.
• 24:38
  Steve Foy: Yeah, that's just, it's both exciting areas.
• 24:41
  Ryan: Yeah, and that's a v- very good point there regarding pri- especially auto callables.
• 24:46
  Ryan: You mentioned IPOs, SpaceX.
• 24:49
  Ryan: There's others that are coming down the pipeline here within the next year, really big IPOs.
• 24:55
  Ryan: What impact is that having on ETFs?
• 24:59
  Ryan: There is a, an issue with the indexes, who's gonna let SpaceX in, who's not.
• 25:04
  Ryan: How is all that impacting ETFs?
• 25:08
  Steve Foy: I think when you're thinking that question, it's wondering, is the IPO impacting the ETF space or the other way around in a little bit of way, right?
• 25:16
  Steve Foy: Like the indexing rule, I don't think I wasn't party to, all of those changes around the, the indexing, but I would assume the biggest need was to get SpaceX into these indexes as fast as possible, right?
• 25:28
  Steve Foy: 'Cause that's what investors wanted, and obviously ETFs are the ones tracking those.
• 25:33
  Steve Foy: So you know, I th- more broadly though, the IPO...
• 25:35
  Steve Foy: These IPOs are not like, the IPOs of the past.
• 25:39
  Steve Foy: They're just massive and only getting larger, so there's huge demand.
• 25:43
  Steve Foy: And like we've talked about here and we've seen in the industry, the, the issuers are gonna do whatever it takes to get investors what they want and however they want it.
• 25:51
  Steve Foy: So I think if anything, what we're seeing from the IPO space is speed, right?
• 25:56
  Steve Foy: I think we're seeing, we've had IPO ETF, single stock ETFs launch the day after an IPO pretty consistently now.
• 26:05
  Steve Foy: I don't see that trend slowing down anytime soon.
• 26:08
  Steve Foy: If you can name a...
• 26:09
  Steve Foy: If you have a coming IPO that you're aware of, I I bet you a dollar that there's a filing for it.
• 26:15
  Steve Foy: So it's again, another area to push limits, and I think with SpaceX behind us, it's a new playbook, and I'm sure it's gonna keep innovating from here.
• 26:23
  Ryan: Yeah, that's interesting about the those single stock ETFs the day after it goes public.
• 26:29
  Ryan: Another way innovation, technology.
• 26:31
  Ryan: Without technology, that's probably not happening.
• 26:34
  Ryan: Fantastic.
• 26:35
  Ryan: So lastly, Steve, you've dropped a lot of great information, a lot of great insight here about ETF trends, the growth of ETFs.
• 26:46
  Ryan: So what's next for ETFs?
• 26:47
  Ryan: We've had active ETFs, private investments, derivatives.
• 26:51
  Ryan: We talked about them all.
• 26:52
  Ryan: Crypto ETFs, share classes we really haven't...
• 26:55
  Ryan: That could be a whole nother conversation there, Steve.
• 26:58
  Ryan: So what do you think is next for ETFs?
• 27:02
  Steve Foy: I think in terms of kind of the most interesting conversations I'm having are around prediction markets.
• 27:08
  Steve Foy: That's kind of another area where, market innovation and ETF innovation are in lockstep.
• 27:15
  Steve Foy: I know that the regulators just invited people to come comment on novel products.
• 27:19
  Steve Foy: And similarly we did see, I think just yesterday, the Treasury Department looking into tax treatment for ETF specific things like 351.
• 27:28
  Steve Foy: If the ETF rule is any indication, the SEC looking for feedback on novel products and then tax strategies, right?
• 27:35
  Steve Foy: If it comes out with a rule like the ETF rule, I think it'll only be the better for the industry, right?
• 27:39
  Steve Foy: That clarity has been maximized.
• 27:42
  Steve Foy: But yeah, ultimately I think we're just getting started and anywhere the market's gonna go, ETFs are gonna go.
• 27:48
  Steve Foy: I think it's a big question.
• 27:49
  Steve Foy: Too many new possibilities throughout.
• 27:51
  Steve Foy: Compute futures are one, right?
• 27:52
  Steve Foy: That's a, a market that's coming.
• 27:54
  Steve Foy: There's ETF filings for that.
• 27:56
  Steve Foy: But yeah, it's not stopping
• 27:59
  Ryan: Very good point, Steve.
• 28:00
  Ryan: Who knows next five years where we're gonna be at with ETFs.
• 28:04
  Ryan: I love it, especially within ETFs, there's such a entrepreneurial spirit within ETFs, which is a lot of fun.
• 28:13
  Ryan: Really helps move the industry forward, I think, in a good way.
• 28:17
  Ryan: Steve, thank you so much for coming on the show.
• 28:20
  Ryan: Really fun conversation.
• 28:22
  Ryan: Great insight about the ETF space.
• 28:26
  Ryan: You probably are very busy with trying to keep up with all the trends, new issuances, so I'm gonna let you get back to your day job, Steve.
• 28:35
  Ryan: So thank you so much for coming on the show.
• 28:36
  Ryan: Where can our audience get more information about Tidal Financial Group?
• 28:42
  Steve Foy: Thank you, Ryan.
• 28:43
  Steve Foy: It's been a, a very enjoyable conversation.
• 28:45
  Steve Foy: If you're looking for information on title or research or KPIs, we produce a lot on the industry you can find that at titlefg.com
• 28:53
  Ryan: Awesome.
• 28:54
  Ryan: Fantastic, Steve.
• 28:55
  Ryan: Thank you, and thank you everyone for listening You can watch all of our other episodes on YouTube a- and all the other platforms that you listen to your favorite podcasts.
• 29:04
  Ryan: Please be sure to like and subscribe to those channels and give us a follow on LinkedIn.
• 29:08
  Ryan: Thank you very much, and have a great rest of your week