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Portfolio > ETFs

Why No Advisor Should Ignore ETFs

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The exceptional growth of the ETF business is undeniable and global assets under management topping $2.2 trillion only confirm this. Is it too late for advisors to jump into the ETF market? Where will the next big growth opportunities be?

A new report, “The next generation of ETFs: Why every asset manager needs an ETF strategy,” contends that despite assets being concentrated among a handful of large ETF managers, it would be a mistake to conclude the industry is saturated or lacking opportunity.

The report, published by consulting firm PwC, also examined active versus index ETFs along with growing usage of ETFs within retirement plans, including 401(k)s.

Among U.S.-based RIAs, “ETFs still only have a 7% share of wallet among advisors combining active and passive strategies, compared to 37% using mutual funds. This indicates a substantial market opportunity even in one of the most mature market segments.”

For self-directed investors, just 4% use ETFs in their portfolios, which illustrates significant upside. As the public learns that ETFs can be successfully used as core portfolio holdings along with tactical trading tools, cash equalization and risk management, the comfort level with owning ETFs should increase.

In the retirement plans market, three out of four ETF firms cite 401(k) platform support as a challenge where traditional mutual funds still dominate. However, lower fees and greater transparency are making ETFs a viable choice.

Focusing on investor education and solutions rather than products can drive asset growth for advisors looking to build their ETF business. “The key to a successful ETF strategy is envisioning how these products will address the needs of individuals, advisors, retirement plans, and other types of institutional investors.”


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