Fully 78% of financial advisors surveyed about their use of exchange traded funds at the Morningstar ETF Invest Conference in Chicago this month said they planned to increase their use of ETFs in retail investors’ portfolios in 2013, Guggenheim Investments announced Thursday.
Just 1% of the 55 advisors that Guggenheim surveyed onsite at the Morningstar event said they didn’t plan to increase their ETF usage, and only 16% of advisors cited low costs as the biggest advantage to incorporating fixed-income ETFs into retail investor portfolios.
Convenience and liquidity were listed by 71% of advisors as the biggest advantages of using fixed-income ETFs in retail client portfolios, while 13% named transparency and tax advantages as the biggest benefits.
“There is room to grow in the ETF space, and we would argue that it’s in the early games,” said Tony Davidow (left), managing director and portfolio strategist at Guggenheim Investments, at a media roundtable in New York on Wednesday. “We think much of the growth will come from advisors.”
The Guggenheim survey mirrors an independent advisor outlook study released in October by Charles Schwab, which reports that ETFs lead in the type of investment that advisors say they are most likely to invest in more over the next six months. A total of 32% of 839 advisors surveyed said they invested more in ETFs in July, compared with 34% in January. In the No. 2 spot were alternative investments, at 18% of advisors in July versus 19% in January, and in the No. 3 spot was real estate, at 18% in July versus 14% in January.
While advisors told Guggenheim that fees are not their primary concern, fees have nevertheless been dropping throughout the industry, with BlackRock and Vanguard two of the latest to take action. In September Charles Schwab cut ETF fees, some as much as 59%, and Fidelity Investments had waived trading commissions in 2010 and 2011 on a group of ETFs.
Guggenheim, meanwhile, has been building a name for itself as an actively managed fixed-income ETF shop. The firm offers a total of 80 domestic and international equity, fixed-income and currency exchange traded products, but it prides itself on its BulletShares high-yield corporate bond ETFs, which carry an expense ratio of 0.42%.