Redefining Risk: The Revolutionary Approach of Innovator's Defined Outcome ETFs

Scott’s Note: Welcome to a sneak preview of an interview we recorded last week with Bruce Bond, CEO Innovator ETFs for the December edition of The Wealth Advisor Magazine.

In our ongoing series spotlighting ETF innovators, we recently had the pleasure of talking to Bruce Bond, CEO of Innovator. Bond's firm has captured the attention of the industry with its "defined outcome ETFs," a product aiming to revolutionize the way advisors and clients approach risk and return.

Every advisor and broker-dealer representative faces the same conundrum: how to offer clients upside potential while limiting downside risk. In a market characterized by uncertainties and volatility, a pressing need has emerged for investment products that can offer some semblance of predictability or at least a form of downside protection.

Bruce Bond defines these as "defined outcome ETFs," and they provide investors with a predefined return based on their investment. For instance, one can buy into the S&P 500 through these ETFs, and even if the market is down 15% over a one-year "outcome period," the investor does not lose money.

There is also a performance cap on the upside, providing between 15 and 20% of the market's upside. These features make the product an appealing option for clients seeking exposure to the equity market without the associated risk.

"Think of it as having bumpers on a bowling lane," says Bond. "Even if you throw a bad bowl, you're still going to stay on the lane."

For advisors looking to attract and retain clients, these defined outcome ETFs offer something compelling. They provide a tangible proof point that the advisor is knowledgeable and has put measures in place to protect the client's investment. Bond describes them as "layup investments for advisors that want to build a big business."

In an environment where clients are increasingly cautious but still desire market exposure, having an investment option that limits downside while providing reasonable upside can be a significant differentiator.

For those interested in diving deeper, Innovator has extensive resources available on their website. The company is also available to field queries, welcoming questions that may arise. "No question is ridiculous," assures Bond, emphasizing the firm's role as a problem-solver in this space.

Defined outcome ETFs offer something for all market conditions. If the market is down, they provide a downside buffer. If it's flat or up but under the cap, you keep pace. The only time you lose to the market is if it performs above the cap set for the upside.

For advisors and BD representatives, these investment vehicles present an opportunity to radically rethink portfolio construction and client advising. As we navigate the choppy waters of today's market, tools like Innovator's defined outcome ETFs might just be the lifebuoys we've been searching for.

For those who want to kickstart their journey with Innovator's products, Bond suggests focusing on the ticker symbols BNOV or PNOV should be ready by the first day of November to get ahead of the curve.

As we step into the future, Innovator's revolutionary approach beckons us to reconsider how we understand risk and reward. With tools like these, who knows what other innovations await us in the rapidly evolving world of investment? Keep your eyes peeled; it seems the game is changing, and for those willing to adapt, the rewards could be significant.


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