First Trust Advisors L.P. is a fee-based registered investment advisor (RIA) that’s based in Wheaton, Illinois. The private, limited partnership manages billions in assets. Its client base primarily comprises non-high-net-worth individuals and investment companies.
First Trust Advisors Background
First Trust was established in 1991, along with its affiliate, First Trust Portfolios L.P. (FTP). FTP provides supervisory, administrative and evaluation services for unit investment trusts (UITs). First Trust’s general partner is The Charger Corporation, and the firm’s only limited partner is Grace Partners of DuPage.
First Trust Advisors Client Types and Minimum Account Sizes
The firm’s client base consists of individuals and high-net-worth individuals, FTP-sponsored UITs, trusts, corporations, foundations, pension and profit-sharing plans, mutual funds, variable annuity sub-accounts, exchange-traded funds, closed-end funds (CEFs), among others.
If you’re interested in investing with First Trust, you’ll need at least $100,000 to establish an advisory relationship.
Services Offered by First Trust Advisors
First Trust specializes in the following advisory services:
- Portfolio management
- Selection of other advisors
- Security ratings or pricing services
- Publication of periodicals or newsletters
First Trust Advisors Investment Philosophy
First Trust’s core principles are to “know what you own, invest for the long-term, employ discipline, re-balance and control taxes," according to its website. The firm’s philosophy is rooted in the belief that a company’s long-term value is determined by the cash flow it produces.
Though the firm mainly focuses on equity securities, fixed-income securities and alternative asset classes, it has multiple teams on its investment committee who oversee research and securities analysis. Its investment committee consists of an equity sub-committee, a fixed-income sub-committee and an alternatives sub-committee.
Fees Under First Trust Advisors
First Trust earns its compensation through the following three services: FTP-sponsored UITs, separately managed accounts (SMAs) and its management of CEFs, ETFs, open-end mutual funds and variable annuity sub-accounts (the funds). For its FTP-sponsored UITs, the firm assesses fees as a fixed amount per unit. Each trust’s prospectus specifies the exact fees. First Trust charges non-negotiable asset-based fees for the funds, and each fund’s prospectus also includes specific fees.
Individual or institutional clients with SMAs pay a standard annual fee of 0.50% of AUM if they’re invested in equity and balanced portfolios. Management fees are negotiable for individual clients with fixed-income securities. In providing portfolio advice, First Trust says it may also rely upon the services of non-discretionary portfolio consultants or investment strategy providers. For instance, First Trust works with Morningstar Investment Management, LLC to provide such services. The firm then pays a portion of its compensation to these providers.
What to Watch Out For
As a fee-only firm, First Trust may earn additional compensation when referring clients to other advisors, which creates an incentive to make such recommendations. However, as an SEC-registered practice, First Trust has a fiduciary duty to act in its clients best interests.
Additionally, the firm has one disclosure on its regulatory record for which it paid a $15,000 fine and over $31,000 in disgorgement in 2023.
All information was accurate as of the writing of this article.
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