With clients increasingly concerned about preserving gains while maintaining growth potential, financial advisors continue to seek investment vehicles that can deliver on both fronts. The challenge has been finding solutions that offer meaningful downside mitigation without sacrificing too much upside participation. The Innovator ETFs® Equity Managed Floor ETF® (ticker: SFLR) addresses exactly this challenge by offering a floor strategy that aims to limit maximum potential losses while allowing significant upside participation.
In an interview with The Wealth Advisor’s Scott Martin, Andrew Nelson, Director of Product Strategy at Innovator ETFs, discussed how this exchange-traded fund (ETF) differs from traditional Buffer ETFs™ by accepting initial losses while establishing a protective floor that seeks to prevent further downside, creating a more balanced risk-return profile for risk-conscious clients.
A Different Kind of Protection Strategy
Unlike traditional buffer strategies that protect against initial losses, SFLR takes a contrarian approach, accepting initial market declines but establishing a laddered floor beyond which further losses are mitigated. Innovator’s strategy implements a systematic approach with a 10% floor, before fees and expenses, that is laddered quarterly, creating a blended portfolio structure. Through this methodology, SFLR seeks to offer clients a maximum annual loss range of approximately 8% to 12%*, significantly reducing the downside potential compared to the broader market.
SFLR aims to deliver a more palatable risk-return profile for clients who may be uncomfortable with the potential for significant drawdowns but still want market participation. According to Nelson, the fund seeks to offer “about two-thirds of the volatility of the broad market and 70% to 80%* of the upside.”
For advisors, the value proposition becomes clear: a tool that can help set realistic expectations with clients about both potential losses and the opportunity to capture market gains. This approach might transform often difficult conversations about risk tolerance into more concrete discussions about sought after parameters.
Client Psychology and Portfolio Construction
One of the most challenging aspects of financial advising is managing client expectations and emotions during market volatility. SFLR is designed to enable the advisor to directly address the psychological dimension of investing instead of focusing on, for example, the mechanics of market timing and a reset period.
“It’s about use cases,” Nelson explains. “We can’t dictate portfolio holdings—each client is going to be unique. You can talk to a client and say, ‘Are you okay with losing 10%?’ That might feel like a lot, but most clients are. They’re just not okay with losing 25%, 30%, 35%, 40%. So, that consummate floor allows the upside to be higher and more consistent over the longer term.”
The dynamic nature of the floor might help frame market movements in a more digestible way for clients, allowing advisors to show clients how they’re protecting the substantial gains achieved during the recent bull market. As Nelson points out, “We’ve seen the S&P double over about the last five years. If you put a hypothetical floor in place, you’re really only putting at risk a few months of those gains, so to speak, by still preserving some of the upside as it continues to possibly climb higher.”
The SFLR strategy permits some downside movement while implementing a protective boundary underneath accumulated wealth, helping clients visualize their risk in more concrete terms. The psychological benefits of such an approach might significantly enhance client retention through market turbulence, potentially helping advisors to keep clients focused on long-term goals rather than short-term volatility.
How SFLR Might Fit in a Portfolio
For advisors considering where SFLR might fit within client portfolios, Nelson positions the strategy as a potential alternative to a tactical allocation. “This is much more of what we might dub ‘evergreen,’” he says. “We’re laddering these floors for you and taking care of the heavy lifting under the hood so that it can be more of a core-like holding.”
The strategy’s potentially enduring relevance differs from the more time-bound deployment of Innovator’s other offerings that have specific outcome periods geared towards more precise timing. With SFLR, “We don’t have, say, the outcome period of one year or six months or two years,” Nelson says.
A systematic approach to floor implementation seeks to alleviate advisors’ need to constantly monitor optimal entry and exit points, potentially making the strategy more suitable for ongoing allocations in clients’ portfolios.
Nelson notes that the floor strategy is available across multiple market segments: “There’s the NASDAQ-100 version, the Russell 2000 version, all following the same methodology of providing these tranched or moving floors over the quarterly basis.”
Institutional Quality for Retail Investors
One distinguishing feature of SFLR is its actively managed approach and institutional pedigree. Innovator has teamed up with Parametric as the sub-advisor for the strategy.
“We have partnered with what we think is best in class at options-based risk-managed strategies on an institutional caliber,” Nelson says. SFLR employs what he describes as “systematic active” management, where the portfolio managers aren’t making tactical stock or options selections but rather implementing a consistent, methodical process to maintain the floor strategy.
The strategy resembles approaches previously available primarily to institutional investors. “Parametric for years ran this strategy and still does in a very similar fashion for institutional clients on a one-off basis. It’s not a new idea—it’s just new in the ETF wrapper,” says Nelson. The transparency of the ETF structure allows advisors and clients to see the holdings daily, providing clarity around how the floor strategy is being implemented.
Future Developments
Looking forward, Nelson indicates that Innovator plans to continue expanding both its floor and Buffer ETF™ offerings. “This floor franchise has certainly seen strong growth for us. We’re always open to new asset classes and new ideas in that space,” he says.
The company has maintained its commitment to innovation in the options-based ETF space, with Nelson noting that Innovator launched several new Buffer ETFs™ on March 1, 2025. For advisors who have found value in his firm’s approach to defined outcome investing, the expanding product lineup may offer additional tools for portfolio construction.
Balancing Growth Potential with Defined Risk
Financial advisors seeking to balance growth potential with defined risk parameters, might find that SFLR represents an intriguing addition to the investment toolkit. The strategy is designed to accept initial losses but establish a laddered floor beyond which further declines are mitigated offers a unique risk management profile that may resonate with clients concerned about significant drawdowns.
The psychological framing of protecting accumulated gains while maintaining upside participation might help advisors have more productive conversations about risk with their clients. By packaging an institutional-quality strategy in an accessible ETF wrapper, Innovator aims to democratize an approach previously available primarily to large investors.
As market uncertainty persists, systematic solutions such as SFLR may continue to find a place in advisors’ portfolio construction process. The fund’s “evergreen” nature and transparent methodology make it a potential core holding for clients seeking defined parameters around their market exposure.
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Additional Resources
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Disclosures
*The Fund targets an annual maximum loss of approximately 8% to 12%, seeks to participate in approximately 70–80% of the annual returns of the Solactive GBS United States 500 Index, and expects two-thirds of the volatility of the Index. The annual maximum loss, participation rates, and volatility expectations are not guaranteed.
The S&P 500 Index is a broad U.S. large-capitalization index seeking to track the performance of the 500 leading companies listed on stock exchanges in the U.S. The Solactive GBS United States 500 Index seeks to measure the returns of the 500 largest U.S. companies, as measured by market capitalization. The Russell 2000 Index seeks to measure the performance of the small-capitalization segment of the U.S. equity market, as defined by FTSE Russell.
There is no guarantee the Fund will be successful in providing the sought-after protection of the floor. The Fund’s option strategy may cause the Fund to forego a portion of any upside returns of the Equity Portfolio.
The Fund seeks to provide risk-managed investment exposure to the equity securities represented by the Solactive GBS United States 500 Index through its hedging strategy. There is no guarantee that the Fund will be successful in implementing its strategy to provide a hedge against overall market exposure. The Fund seeks to achieve its investment objective by purchasing a series of four, one-year Flex Options packages with “laddered” expiration dates that are 3 months apart. The Fund will also systemically sell short-dated call option contracts, which have an expiration date of approximately two weeks, with an objective of generating incremental returns above and beyond the premium outlay of the protective put option contracts. The Fund does not provide principal protection or non-principal protection, and an investor may experience significant losses on their investment. In a market environment where the Solactive GBS United States 500 Index is generally appreciating, the Fund may underperform the indices and/or similarly situated funds.
The Sub-Adviser will seek to “ladder” the Fund’s option contracts by entering into new purchased put option contracts packages every three months. After such put option contracts expire, the Fund will enter into new put option contracts with one-year expiration dates that are staggered every three months.
As a result of the Fund’s laddered investment approach, on an ongoing basis the Fund will experience investment floors that are expected to be greater or less than the 10% floor provided by an individual options portfolio.
Because the Fund ladders its option contracts and the Fund’s put option contracts will have different terms (including expiration dates), different tranches of put option contracts may produce different returns, the effect of which may be to reduce the Fund’s sought-after protection. Therefore, at any given moment the Fund may not receive the benefit of the sought-after protection on losses that could be available from Options Portfolio with a single expiration date.
FLEX Options Risk. The Fund will utilize FLEX Options issued and guaranteed for settlement by the Options Clearing Corporation (OCC). In the unlikely event that the OCC becomes insolvent or is otherwise unable to meet its settlement obligations, the Fund could suffer significant losses. Additionally, FLEX Options may be less liquid than standard options. In a less liquid market for the FLEX Options, the Fund may have difficulty closing out certain FLEX Options positions at desired times and prices. The values of FLEX Options do not increase or decrease at the same rate as the reference asset and may vary due to factors other than the price of reference asset.
The Fund’s investment objectives, risks, charges and expenses should be considered carefully before investing. The prospectus and summary prospectus contain this and other important information, and it may be obtained at innovatoretfs.com. Read it carefully before investing.
Investing involves risks. Loss of principal is possible. Innovator ETFs are distributed by Foreside Fund Services, LLC.
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