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In 2017, Emil Tarazi and his colleagues saw a gap in the market: exchange-traded fund (ETF) issuers needed a tool to help them better navigate ETF liquidity. So Tarazi co-founded ETFLogic and developed that tool.

Soon after, the team started hearing that wholesalers working for the ETF issuers were using the tool to answer questions from financial advisors. It became clear that advisors wanted access to the data ETFLogic was consolidating to help construct and manage optimized portfolios.

In 2020, LOGICLY—which came to Canada the following year as TMX LOGICLY*—was born.

“I began my career as an ETF market maker and saw the tremendous growth in ETFs. When we started ETFLogic, there were fewer than 2,000 ETFs with about $3 trillion in assets. Today, five years later, there are 3,000-plus ETFs with about $7 trillion in assets,” says Tarazi, now CEO at ETFLogic. “The ETF is a building block. We think of it as an essential, foundational piece of a portfolio. But there are so many different types of these building blocks, so the question is, how do you build better portfolios?”

Also, ETFs aren’t the only building blocks for portfolios. So, while LOGICLY still puts ETFs first, it has expanded to encompass mutual fund and stock analytics as well. And data isn’t the only thing advisors needed from what started as a robust research platform. The tool now incorporates workflows for fund screening and portfolio construction.

“[LOGICLY] is a place where you can get very deep into fund comparisons [and] find similar funds, and then, once you’ve done that initial research, move towards understanding how those building blocks fit together in a portfolio,” Tarazi explains.

An evolving tool

Tarazi describes the journey to build LOGICLY as client-driven and iterative. The team started by asking the advisors in its network what they needed from a fund research tool. Then the team developed and tested, responded to feedback and tested, enhanced further and tested—always focused on their customers’ requirements.

In a platform that relies on data, the timeliness and quality of that data were paramount. Since ETFs have daily transparency, LOGICLY had to incorporate daily updates. And since advisors wanted quality data, the team arranged for as much information as possible to come directly from the source instead of passing through third parties or vendors.

Repositioning LOGICLY for the Canadian market as TMX LOGICLY required further tweaks. Canada has different fund categories and different ways of handling expense ratios for funds. The team was also able to capitalize on the potential to exploit the powerful advanced analytical capabilities of TMX Grapevine™.

“It’s never a finished product,” Tarazi says. “The markets are constantly evolving. New products come to market and old products get retired….The platform has to evolve with the markets—[and with] the way people build portfolios, which is also changing.”

Adding value with interface, data, and tools

As TMX LOGICLY establishes itself among Canadian advisors, Tarazi says the feedback has been positive. The first thing advisors notice, he suggests, is the intuitive, easy-to-use interface. That interface provides user-friendly access to a tremendous depth of data that helps cut through marketing to reveal facts, as well as workflow tools that are intended to make it seamless for advisors to perform complex back-testing and generate compelling client presentations, for example.

“We have a unique set of data points. When it comes to Canadian funds, we have TMX market data that sets us apart from other platforms. So we have very good high-quality views on volumes and spreads for Canadian securities,” Tarazi says, emphasizing that it’s the combination of interface, data, and tools coming together that creates value for users.

One tool Tarazi highlights is the Portfolio Coach, an “autopilot for portfolios” powered by artificial intelligence. Tarazi believes the tool makes it easier to comply with Canadian client-focused reform and know-your-client requirements by allowing advisors to set objectives on accounts and keep an audit trail of their research. It can also monitor portfolios and alert advisors when they stray from factors or investment policies.

In the end, Tarazi says, all the workflow tools integrated within TMX LOGICLY are intended to simplify the investment research process for advisors so they can build and manage portfolios more efficiently. That frees up time to spend with clients. After all, shifting several hours every week toward client meetings and outreach can strengthen relationships, uncover new opportunities, and enable advisors to better meet their clients’ long-term financial needs. “Ultimately, that’s what all advisors want.”

This information is provided for information purposes only. Neither TMX Group Limited nor any of its affiliated companies guarantees the completeness of the information contained in this publication, and we are not responsible for any errors or omissions in or your use of, or reliance on, the information. The views, opinions and advice provided in this article reflect those of the individual author. This publication is not intended to provide legal, accounting, tax, investment, financial or other advice and should not be relied upon for such advice. TMX, the TMX design, TMX Grapevine, TMX Group, The Future is Yours to See., and Voir le futur. Réaliser l’avenir. are the trademarks of TSX Inc. 

* TMX is the trademark of TSX Inc. and LOGICLY is the trademark of SigmaLogic Inc. and is used under license.

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Facilitate business building with useful research and analysis

There’s an art and science to prospecting. The art comes through in the way advisors present themselves to clients: the words they choose and the tone they take. The science is the well-informed investment recommendations that demonstrate advisors understand the prospect’s needs—and how to meet them.

Teri Renaud, Global Head of Sales at TMX Group, says TMX LOGICLY powerfully supports that second piece. With a few clicks, advisors can input a prospect’s existing portfolio, run an analysis that identifies areas for improvement, and generate a leave-behind PDF report with notes that explain the benefits of the new portfolio.

If the sale isn’t made in the short term, advisors can keep the existing portfolio on watch within the platform and point out emerging deficiencies.

“Advisors can reach out to a prospect and say, ‘You know what? You’re out of line with your income target. If you consider this similar ETF, you may be able to increase your yield but keep your risk and performance in line,’” Renaud says. “Those very real, tangible recommendations show the prospect the value their Advisor can bring.”

Renaud sees TMX LOGICLY first and foremost as a prospecting tool because it’s such a direct way for advisors to build confidence in initial and subsequent interactions with potential clients. But the other important way the platform can help advisors build their businesses is by making day-to-day operations more efficient, so they can spend more face time with their current clients.

Streamlined processes

Advisors who give TMX LOGICLY a spin through a free trial or a guided demo tend to be struck first by its simplicity. It’s easy to navigate and intuitive to use, says Renaud.

With a few clicks, advisors can access trends in the ETF market—for example, the best and worst performing funds by region or investment mandate, or the funds with the largest inflows or outflows. This can help identify potential investment strategies and opportunities to boost clients’ alpha. TMX LOGICLY can even provide insight into the best time of day to trade a specific ETF.

A few more clicks and advisors can analyze a portfolio’s risk exposure, generate tax-loss harvesting ideas, or dive deep into the powerful analytics which are based on the individual holdings within an ETF or mutual fund. Advisors can also back-test scenarios to see how a portfolio would have performed through historical periods, with different rebalancing criteria and fee overlays.

When ready, advisors can quickly generate a customized report with content tailored to support a recommendation.

“Often, they’ll show the client their portfolio and recommendations on the screen, which illustrates the message very clearly with powerful visuals. Advisors can easily display this message on their tablet or laptop, or in a video conference,” Renaud says. “Or, with a couple of clicks, they can print out a PDF, very professional looking, and hand that to the client…to highlight the key messages that they conveyed during the client presentation.”

One of the biggest efficiency gains for many advisors is the integration of the investment research and portfolio analysis functions, so there’s no need to flip back and forth between different workflows. Advisors with firms that have opted for back-office integration can also see their client portfolios (updated daily) inside the platform. We can further streamline the Advisor workflow by integrating to their OMS, allowing them to take a trade idea generated by the platform, and simply click to make the trade or action the swap from one fund into another.

“It’s a very seamless workflow, and that’s going to make the investment advisor more efficient,” she says. “It’s designed to save them time, which ultimately gives them more time in front of their clients. And if they’re in front of their clients, then they’re focusing on building their books of business.”

Smooth transitions

Many advisors have invested time building spreadsheets, reports, and custom analyses to complement their existing platforms, as well as creating watch lists for ETFs, stocks, and mutual funds. That, combined with the limited number of hours in a day, can make a platform switch to TMX LOGICLY seem daunting.

But Renaud says her team has a lot  of experience replicating elements for advisors, and regularly works with them to improve on existing tools as they’re brought over to the new platform. In addition, the team provides the support advisors need to upload client portfolios into the platform. “It’s also very easy just to create a portfolio on the fly…it can take just a few minutes,” she says.

In the end, TMX LOGICLY is designed to do what technology does best. This frees up advisors to play to their strengths—including deciding how to apply the results of analytics to investment portfolios, strengthening relationships with existing clients, and following up on opportunities with prospects.

“There’s nothing that can replace what the investment advisor offers their clients. We’re just giving the advisor tools to do their job better, more efficiently and more professionally.”

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This article is provided for information purposes only. Neither TMX Group Limited nor any of its affiliated companies guarantees the completeness of the information contained in this publication, and we are not responsible for any errors or omissions in or your use of, or reliance on, the information. The views, opinions and advice provided in this article reflect those of the individual author. This publication is not intended to provide legal, accounting, tax, investment, financial or other advice and should not be relied upon for such advice. The information provided is not an invitation to purchase securities listed on Toronto Stock Exchange and/or TSX Venture Exchange.. TMX, the TMX design, TMX Group, The Future is Yours to See., and Voir le futur. Réaliser l’avenir. are the trademarks of TSX Inc.

* TMX is the trademark of TSX Inc. and Logicly is the trademark of SigmaLogic Inc. and is used under license.

Macroeconomic shifts mean it may be time to review client strategies.

Quantitative easing is clearly in the rearview mirror as central banks raise interest rates to dampen inflation, and as Gloeckler notes, “we’re going through consequential macroeconomic shifts in the global economy.”

That’s why this may be a critical time for financial advisors to review each client’s IPS with them, to ensure that they’re still comfortable with their investment strategies.

“We’re getting out of an extended [period of free money—a] central bank-supported stimulus period. Hopefully, we’re going to go back to more standard market conditions soon. So, whatever has worked over the past two years, it might be time to review that. Investors should be asking themselves if they still believe in the positioning of their portfolio,” says Gloeckler.

Be aware of mechanical effects.

Gloeckler points out that there are mechanical effects at play in the current environment. Gloeckler notes that, in fixed income securities, the yield curve of all issuers rises as target rates increase and since present value depends on future cash flows discounted at a rising rate, valuations are dropping across all investments.

That said, Gloeckler stresses that it’s not the right time to simply throw everything out. “It’s the right time to ask yourself important questions and be aware of the mechanical effects that are going to happen.”

He also identifies specific steps that advisors may consider with their clients, including analyzing opportunities to harvest and carry forward investment losses, reviewing exposure to sectors that may be more vulnerable to interest rate increases, and moving from broad-based exchange-traded funds (ETFs) to more targeted funds or even single stocks. Gloeckler adds that [TMX] LOGICLY equips advisors with the ability to conduct such deep-dive analysis at both a client and practice level.

“Through direct indexing, you can, [for example], focus on a few high-dividend-paying companies that are navigating market cycles fairly well, which may be suitable for clients in a volatile market,” he says.

Data from TMX LOGICLY has indicated strong flows into short-term – one-year, or less, — T-bills suggesting investors are seeking to maintain positive real returns in the face of high inflation while staying nimble to adjust to volatile interest rates. This data suggests these short-term investments are a parking spot for funds that may find their way back into other areas of the market. 

Leverage AI to improve portfolio construction.

“We’re running a lot of AI-inspired models,” says Gloeckler. “We’re able to crunch so many data points so fast that some of the things that were impossible to achieve not so long ago are now within reach.”

For example, using historical data, algorithms can be taught to recognize patterns, features, and environments to attempt to predict the potential future behaviour of a security. These algorithms can review a pool of securities and identify alternatives with similar performance and exposure to help advisors replace an investment sold to realize a capital loss. the algorithms can also help monitor rebalancing of third-party models to keep advisors informed.

Even more importantly, today’s technology makes it easier for advisors to monitor and respond quickly when a portfolio strays from a client’s IPS. TMX LOGICLY, for example, systematically, consistently, and rigorously monitors for deviations from the IPS so it can alert the advisor.

“We provide you with tools to do an ad hoc analysis, a thorough portfolio analysis, or a continuous AI-based solution called the Portfolio Coach, where, every day, we’ll make sure that you’re in line with your expectations,” Gloeckler says. “TMX LOGICLY is not a black box. It’s really a decision support system. It empowers you [as an advisor], and guides you to deliver confident outcomes.”

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This information is provided for information purposes only. Neither TMX Group Limited nor any of its affiliated companies guarantees the completeness of the information contained in this publication, and we are not responsible for any errors or omissions in or your use of, or reliance on, the information. The views, opinions and advice provided in this article (including those of Colin Gloeckler) reflect those of the individual author or speaker and do not reflect those of TMX Group Limited. This publication is not intended to provide legal, accounting, tax, investment, financial or other advice and should not be relied upon for such advice. The information provided is not an invitation to purchase securities listed on Toronto Stock Exchange and/or TSX Venture Exchange. TMX Group and its affiliated companies do not endorse or recommend any securities referenced in this publication. TMX, the TMX design, The Future is Yours to See., and Voir le futur. Réaliser l’avenir. are the trademarks of TSX Inc. 

* TMX is the trademark of TSX Inc. and Logicly is the trademark of SigmaLogic Inc. and is used under license.

Exchange-traded funds (ETFs) attracted record inflows of $53 billion in 2021,^[1] a 27% increase from 2020, and the first quarter of 2022 saw inflows of $5.0 billion in January 2022,^[2] $3.9 billion in February 2022^[3] and $4.8 billion in March 2022.^[4] Yet, despite their sustained popularity, ETFs tend not to be prioritized within portfolio analytics solutions.

TMX LOGICLY* aims to change that, says Emily Choi, Director of Advanced Analytics at TMX. Launched by TMX in March 2021, TMX LOGICLY is an analytics platform that streamlines investment research, asset allocation, portfolio construction and client reporting within one unified, cost-effective system for financial advisors, portfolio managers and research teams.

“Most vendor solutions try to fit ETFs into the mutual fund mould,” says Choi. “TMX LOGICLY puts ETFs first and also supports mutual funds and segregated funds.”

Choi emphasizes that wealth management professionals don’t simply need more data and analytics. What they really need is the right data and analytics embedded into tools they’ve already been using for other parts of their work. In addition, they need solutions that recognize that ETFs trade very differently from mutual funds—so, to be useful, analytics must address ETF-relevant variables such as spreads and liquidity.

“We really make an effort to distill that data in a meaningful way to inform the decision-making process. For example, instead of just showing one static risk rating for a fund, we’ll show risk over time as it evolves and how it changes with respect to market movement. It’s a richer data set [because] there isn’t just a data field; there’s a chart that contextualizes information.…It’s not just looking at one thing in isolation.”

Leveraging AI

Artificial intelligence (AI) is embedded into TMX LOGICLY to help advisors optimize ETF portfolios.

“AI can be applied in so many different ways. We’re using it as part of the investment research and evaluation process,” says Choi. “Advisors can research similar funds and compare recent performance or yield. They can also research new investments and model how they would impact their portfolios.”

TMX LOGICLY proposes relevant alternatives from a universe of more than 1,000 ETFs and 24,000 mutual funds. It also monitors portfolios in the background and alerts advisors if a security’s risk profile changes or as markets shift.

At the same time, the platform’s technology provides advisors with another data point for navigating client-focused reforms, including Know Your Client and Know Your Product obligations. Specifically, TMX LOGICLY provides comprehensive client reports and automatic documentation of the investment decision-making process.

Related to that, TMX was among seven applicants selected to participate in OSC TestLab’s Spring 2022 Test to demonstrate “making product information more accessible” and “improving information sharing and enhancing client interactions.” Advisors and firms can sign up to put the platform through its paces by running a range of commonly performed tasks and comparing the results against manual processes.

Overall, what excites Choi most about TMX LOGICLY is that it has the potential to drive a better investment decision-making process.

“We believe better data and analytics levels the playing field for advisors and their clients and helps TMX achieve our overarching goal of growing the investment ecosystem.”

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* TMX is the trademark of TSX Inc. and Logicly is the trademark of SigmaLogic Inc. and is used under license.

This information is provided for information purposes only. Neither TMX Group Limited nor any of its affiliated companies guarantees the completeness of the information contained in this publication, and we are not responsible for any errors or omissions in or your use of, or reliance on, the information. This publication is not intended to provide legal, accounting, tax, investment, financial or other advice and should not be relied upon for such advice. The information provided is not an invitation to purchase securities listed on Toronto Stock Exchange and/or TSX Venture Exchange. TMX Group and its affiliated companies do not endorse or recommend any securities referenced in this publication. TMX, the TMX design, The Future is Yours to See., and Voir le futur. Réaliser l’avenir. are the trademarks of TSX Inc.

^[1] Source: National Bank Financial Inc., January 6, 2022 ^[2] Source: National Bank Financial Inc., February 3, 2022 ^[3] Source: National Bank Financial Inc., March 2, 2022 ^[4] Source: National Bank Financial Inc., April 4, 2022