ETF sponsors pumped a record number of products into the market last year, and are on pace to do so again in 2022 – capitalizing on regulatory changes and market uncertainty to test advisor appetite for active, thematic, environmental, social and governance-focused, and niche strategies.

Managers also have packaged individual ETFs into pre-set portfolios designed to be easy for advisors to use – and hard for them to pull money out from a single, underperforming strategy.

The last few weeks, however, have seen model development take a slightly different tack, addressing some of the barriers to integrating models into one’s practice, and ways to get them to work in tandem with mutual fund wrap programs or direct-indexing strategies packaged as separately managed accounts.

Last week, JPMorgan unveiled its tax-smart separately managed account platform, which gives advisors access to the firm’s custom indexing tools as well as its tax-advantaged ETF and mutual fund models. Using technology from JPMorgan’s 55ip subsidiary, advisors can perform ongoing tax management of both custom SMAs and ETF models, and simplify the process of getting clients into these portfolios.

Principal Global Investors also last week introduced a model platform that brings together custom indexing with mutual fund or ETF models that the firm developed in collaboration with SmartLeaf Asset Management. The 37 new models incorporate in-house and third-party mutual funds and ETFs, and can be customized for tax and environmental, social and governance preferences, as reported in Financial Advisor IQ’s sister publications, Ignites and FundFire.

In theory, custom SMAs could lure some advisors away from ETF models. But in practice, executives at Principal and JPMorgan say putting both wrappers on the same platform makes it more likely an advisor would adopt either, or both.

Click on the image for a dive into how direct indexing works, and how it differs from other model portfolios.

The JPMorgan platform lets advisors use the same tax management tools on the custom SMA and ETF models. Ultimately, it will incorporate transition management services, officials told ETF Insider last week. The technology also helps FAs show clients in real time how their portfolios have been personalized while still allowing them to benefit from the efficiencies of ETF models or custom indexing at scale.

Finally, by making the platform multi-product, advisors can put a larger proportion of their clients into some sort of third-party-packaged portfolio by using SMAs for larger or more tax-sensitive accounts and cheaper ETF models for more straightforward situations.