At ThinkAdvisor’s virtual exchange-traded fund conference on Tuesday, a quick poll found that the vast majority of advisors now use some ETFs along with mutual funds and other vehicles in their client portfolios.
During the all-day live trade show, “ETFs: What Advisors Need to Know for Successful Portfolio Building,” 75.7% of several hundred attendees during the first of five panels reported that they now use ETFs with mutual funds and other investments. Only 6.6% reported that they use ETF-only client portfolios, and 17.8% said they don’t use ETFs at all in client portfolios but are considering them.
ThinkAdvisor editor Jamie Green, who moderated the first panel focused on the pros and cons of ETF investing, said that the ETF debate lives on, even though many advisors have become mainstream users of ETFs for their clients.
“Others aren’t fully convinced that they need ETFs at all,” Green said. “After all, index mutual funds have their own advantages, and many advisors are not interested in rapid trading of ETFs.”
Stepping forward to defend the use of ETFs in client portfolios was speaker Ron DeLegge (left), editor of ETFguide, who pointed out that ETFs now total $1.4 trillion under management, with 2008 being the only year in the last 10 years when the market hasn’t grown. In June 2013, assets decreased 4.0%, driven by a $15 billion drop in the international-emerging category.
DeLegge first went over the basics of ETFs, saying they offer the benefits of low expenses, trading flexibility and high tax efficiency, and they cover all major asset classes, including stocks, bonds, commodities, currencies and real estate.
“He who offers the lowest cost usually wins the race,” he said, though he acknowledged that “not everybody is a fan of ETFs out there.”
DeLegge noted that Vanguard founder John Bogle, for example, has said that ETFs are like handing an arsonist a match because they tempt investors to trade too often. But DeLegge then shared a slide of a Vanguard study of its own shareholders in 2012 that refutes the notion that investors have become day traders. Rather, it shows that buy-and-hold ETF investors outnumber buy-and-sell traders, at a rate of 83% for mutual funds and 62% for ETFs at Vanguard. Indeed, he said, Vanguard is an ETF leader, with approximately $300 billion under management.
“There are a number of companies that are now scrambling to offer ETFs,” DeLegge said. “Advisors should learn from their lead. You certainly don’t want to become an outdated relic.”
ThinkAdvisor’s virtual conference involved a total of more than 1,000 attendees, who interacted via private chats and message boards as well as at a conference center with keynote speakers, panel discussions, exhibitors’ booths and a networking lounge.