Advisor Channels That Most Use ETFs: Cerulli Study

Wirehouse advisors, Cerulli says, “tend to be devotees of active management, and the long history of stock picking still permeates their psyches. In fact, only 13% of wirehouse advisors doubt that active managers can outperform the stock market.” As such, the reasons wirehouse advisors use passive investments, such as ETFs, Cerulli continues, “center around the ability to access market sectors and to pair active and passive management together.” In addition, “the cache surrounding ETFs” attracts wirehouse advisors.

RIAs and dually registered advisors, on the other hand, tend to use ETFs “because of their lower cost. RIAs in particular tend to be extremely price-sensitive. They rely on asset-based fees as their primary method of charging clients for services.” Since these fees tend to run around 1% of assets under management, Cerulli says, “RIAs choose low-cost underlying investments to keep the clients’ all-in fee at a reasonable level.” It’s worth noting, Cerulli adds, that the same finding “applies to managed account programs at broker-dealers, in which ETFs are popular choices for advisors who prefer lower-cost vehicles for accounts with asset-based fees.”