Although they've been around for decades, ETFs still deserve their reputation for being innovative. (Illustration: Dan Page Collection/© theispot.com)

Innovation and ETFs are often spoken of synonymously. It is a badge worn proudly by those in the ETF industry who use it to differentiate themselves from the mutual funds, closed-end funds, hedge funds, and any and all other “old” products in the market. The interesting point, though, is that the ETF industry was created over 20 years ago, which puts into perspective the rate of innovation in financial services versus technology or other industries.

ETFs can continue to carry the mantle of innovation for two important reasons. One, the ETF space has legitimately become an essential platform for innovative ideas for investment strategies and investment exposure. Two, the ETF structure was designed to be an “open” platform where trading on an exchange democratized pooled investments for investors. Investors could buy and sell one share alongside some of the biggest institutions, receiving a similar cost benefit and investment exposure. Thanks to its evolution transcending beyond just tracking traditional indexes, then came access to strategic passive strategies and top performing portfolio managers.

One of the great benefits about working in the ETF industry is its penchant for attracting innovators, creative thinkers and entrepreneurs who are unafraid of making mistakes, and forward-thinking investors who can provide instant feedback to ETF sponsors by voting with their dollars.

From such a wide-ranging group of collaborators not only comes innovative ETF products, but also organizations and resources that support the industry, its investors and advisors who use ETFs for their client portfolios. A notable example of one such group is Women in ETFs, which launched earlier this year. Women in ETFs represents many of the female leaders in the ETF industry and also maintains a variety of regional groups that allows women in the ETF space to collaborate and share ideas. Per their mission statement, the organization is committed to furthering the careers of women today by leveraging their collective skill and ambition. More information about their leadership efforts and becoming a member can be found at WomenInETFs.com.

Women have played a crucial role in the ETF industry since its inception. Most industry veterans will know of the role played by Kathleen Moriarty of law firm Katten Muchin Rosenman LLP in paving the way through regulatory and logistical obstacles that allowed the SPDR S&P 500, the first ETF, to start trading in 1993. Moriarty’s pioneering work was recently recognized in March by ETF.com with a lifetime achievement award.

Industry innovation even spans a charitable impact that delivers a real global effect to others in need. Philippe Cousteau, Jr.’s GlobalECHO Foundation, which is a philanthropic partner of AdvisorShares, supports three core areas of environmental education, micro-enterprise and investing in the future of women and children. Recently, the GlobalECHO Foundation provided funding needed to install a solar energy system for the hospital laboratory at the renowned Panzi Hospital, which serves women and children in the Democratic Republic of Congo.

The ETF industry proudly wears a badge of innovation that extends through a diverse network of channels. The difference between ETFs and traditional fund structures is similar to the difference between an iPhone and an old rotary phone. An old rotary phone that functions well is not necessarily a bad tool, but an iPhone provides a newer, multi-dimensional technology than can better serve its users. Similarly, while armed with a newer, transparent, universally accessible and efficient technology, the ETF industry continues to strive for different ways to innovate. Diversity is a key component of innovation, and the advent of resourceful organizations that support the ETF industry will further help develop and shape future leaders with a forward-thinking approach.