September 2, 2010

Vanguard ETFs Top iShares in Advisor Loyalty, Cogent Research Finds

Study found that Vanguard ETFs capture about $5.5 million in assets per advisor vs. $5.7 million for iShares

Vanguard is now the top-ranking ETF provider in terms of advisor loyalty, says Cogent Research, which performed and funded the independent study.

Cogent's survey of 1,560 financial advisors, released August 30, found that Vanguard had a gain of 10 points in its loyalty score this year vs. a drop of 8 points for iShares, which came in second.

(The scoring system was developed by Bain & Co. and has been used in a variety of industries, according to Cogent).

State Street/Spiders ranked third overall, while PIMCO came in fourth.

The study found that Vanguard ETFs currently capture about $5.5 million in assets per advisor vs. $2.3 million last year.

The AUM-per-FA figure for iShares is now $5.7 million.

Vanguard outperformed all other major ETF providers in nine of 10 critical areas of client experience and service, explained Meredith Lloyd Rice, a senior project director for Cogent, in a phone interview. She says that fees and expenses are not among the top critical areas.

The top attributes advisors cite when describing ETF-provider loyalty include consistency of performance (including the tracking of errors), transparency and the demonstration of integrity and honesty, and the projection of a bold investment philosophy.

"The momentum in terms of loyalty is with Vanguard," said Lloyd Rice.

While iShares is ahead in terms of market penetration among advisors, 87% vs. Vanguard's 42%, Vanguard ETFs tend to have lower expenses. For instance, the iShares Emerging Markets Index Fund has an expense ratio of 0.72%, while the Vanguard Emerging Markets ETF has an expense ratio is 0.27%.

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