Why Your Financial Advisor Won't Tell You About Income ETFs
There’s an entire category of ETFs out there — funds paying 10, 15, even 30-plus percent annually in distributions — and your financial advisor probably hasn’t mentioned a single one of them.
Not because they’re scams. Not because they don’t work.
Because the system your advisor operates in wasn’t built for them.
I want to walk you through the three structural reasons why. And once you see it, you can’t unsee it.
Quick disclaimer before we get into it: I’m not a financial advisor. I’m not bashing anyone’s profession. I’m a former creative tech executive who retired in 2023, and this is just what I’ve observed, researched, and personally done in my own portfolio. Always do your own research before putting your hard-earned money into anything.
1. Follow the Money
Let’s start with the uncomfortable one.
How do most financial advisors get paid?
The old-school model was commissions — you buy a mutual fund, your advisor gets a cut upfront. That model still exists, but it’s not the dominant one anymore. Today, the most common model is AUM — Assets Under Management. Your advisor charges a percentage of your total portfolio value. Industry average is roughly one percent per year.
So if you hand an advisor a million dollars, they’re earning about ten thousand a year to manage it.
Now here’s where it gets interesting.
If that advisor puts your million into a broad market growth fund and it grows to two million over a decade — their fee doubles. Ten thousand becomes twenty thousand. Their business grows as your portfolio grows. Everybody’s happy.
But what if they put that same million into an income ETF yielding ten percent? You’re pulling out a hundred thousand a year in distributions to live on. The portfolio value stays flat. Maybe it even drifts lower depending on NAV erosion.
The advisor’s fee? Stays flat. Or shrinks.
I want to be clear — I’m not saying advisors are greedy. Most advisors genuinely want to help their clients. But incentives are real. And when the business model rewards growth over income, growth is what gets recommended.
It’s not a conspiracy. It’s just math.
2. The Gatekeepers
This one surprised me the most when I started digging into it.
You and I — retail investors — can log into Fidelity, Schwab, Robinhood, whatever platform we use, and buy a brand new ETF five minutes after it launches. No approval needed. No committee meeting. Just click and buy.
Financial advisors at major firms can’t do that.
If you’re an advisor at a Morgan Stanley, a Merrill Lynch, a UBS — or even a large RIA — there are centralized research teams and compliance departments that have to vet every single fund before it gets added to their approved list. And the bar is high. Many institutional platforms require a fund to have at least a three-year track record. Some want to see hundreds of millions in assets under management before they’ll even review it.
Think about what that means.
Some of the most innovative income ETFs on the market right now — funds using covered call strategies, options overlays, 1256 contracts for tax efficiency — many of them are less than three years old. Some launched in the last twelve to eighteen months.
So even if an advisor wanted to recommend these funds — even if they personally owned them in their own brokerage account — they might not be allowed to buy them for clients yet.
The advisory world moves like an ocean liner. Retail investors move like speedboats.
That’s not a criticism. It’s just how the system works. Compliance exists for good reasons. But the side effect is a massive time lag between innovation and adoption.
3. Career Risk
This might be the most human reason of all.
There’s an old saying on Wall Street — “Nobody ever got fired for buying the S&P 500.”
If an advisor puts a client into a Vanguard growth fund and the market drops twenty percent, the advisor can point to the screen and say, “The whole market is down. This is normal. Let’s stay the course.” And the client nods. Because they’ve heard of Vanguard. They’ve heard of the S&P 500. It feels familiar.
But what if that same advisor puts a client into a leveraged options-based income ETF — something using weekly covered calls on semiconductor stocks — and it underperforms during a massive bull run? Or the NAV erodes faster than expected?
That conversation goes very differently.
The client doesn’t say, “Let’s stay the course.” The client says, “What did you put me in? I’ve never heard of this. Why wasn’t I in the S&P?”
And in the worst case? That client files a complaint. Or leaves. Or both.
There’s real career risk for advisors who recommend newer, more complex strategies — even when those strategies are sound. Even when the math works. The reputational downside of being wrong with something unfamiliar is way bigger than the upside of being right.
I get it. I understand it. But as someone who’s personally building my income from these exact funds, I think it’s important for you to know that this dynamic exists.
So What Does This Mean for You?
I’m not saying fire your financial advisor. If you have a good advisor who understands your goals, who listens to you, who’s transparent about how they get paid — that’s valuable. Keep that relationship.
But here’s what I am saying.
Your financial education is your responsibility. Not your advisor’s. Not your broker’s. Not mine. Yours.
There’s an entire world of income-generating ETFs out there. Funds paying weekly and monthly distributions. Funds using covered call strategies, options overlays, tax-efficient structures. Funds designed to pay you now — not thirty years from now.
I’ve been building my income snowball with these exact tools. I share every position, every distribution, every mistake in real time. I’m not saying these funds are perfect. I’ve taken losses. I’ve had to cut positions. I’ve learned expensive lessons.
But I’ve also built a portfolio generating over eighteen thousand dollars a month in passive income.
And I didn’t learn about any of this from a financial advisor. I learned it from doing the research myself, from other investors sharing their journeys, and from being willing to take messy action.
Every dollar has a job. And sometimes the most important job is making sure you know what tools are available to you — even if the professionals in the room haven’t caught up yet.
Your Next Step
If you want to figure out your own freedom number — how much passive income you’d need to cover your lifestyle — I built a freedom calculator that’s completely free. It walks you through the math so you can see what’s possible for your situation. You can find it right here on my Substack.
And if you want to go deeper — see my full portfolio, talk strategy, and connect with other income-focused investors — that’s what this community is for.
If it doesn’t challenge you, it doesn’t change you. Messy action is better than no action.
— Rico