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January 31, 2017 at 09:22 AM
Looming compliance with the Department of Labor’s fiduciary rule is pushing advisors to favor lower-cost investment products, with 45 percent of advisors planning to increase use of exchange-traded funds and 32 percent planning to boost allocations to passive investment products, according to new research by Cerulli Associates.
Related: DOL posts indexed annuity fiduciary rule exemption draft
“These percentages solidify the uptick in ETF asset growth,” Cerulli notes in the January issue of The Cerulli Edge.
U.S. ETF assets ended 2016 at $2.5 trillion, growing 20 percent during the past year, Cerulli reports, which is partly attributed to “a healthy S&P 500 total return of nearly 12 percent,” but increasingly “more investors are starting to recognize the benefits of the vehicle and gain comfort in their use.”
Flows into ETFs reached an all-time high of $287.3 billion during 2016, Cerulli said its data confirms, “as evidenced by financial advisors’ expectations to increase their allocations to ETFs by 25 percent over the next two years.”
Mutual funds, however, “were clear losers in 2016,” Cerrulli said, as assets ended the year at $12.4 trillion, a 5.9 percent change year over year that represents only one-quarter the growth rate of ETFs.
“Flows did not do the vehicle any service,” the Boston-based research group adds, as mutual funds suffered outflows of $90.8 billion during 2016.
However, passively managed mutual funds raked in more than $226 billion while actively managed mutual funds experienced nearly the opposite, with $316 billion in outflows, Cerulli found.
