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July 31, 2017 at 08:00 PM
An increasingly changing world presents countless options across all facets of work and life. As much as items and routines can be set to cycle and repeat, the constant flow of information has allowed better tools and resources to become available for financial advisors, helping them sift through the noise of the squeakiest wheels. Today’s media at large, including financial media, gravitates toward attracting large volumes of clicks with breaking, albeit sensational, news rather frequently. An advisory firm’s business model needs to go beyond the headlines and the principal tenets of maintaining balance and patience, allowing enough time to make smart decisions and understanding that there are just no absolutes in the financial markets.
(Related: ETFs: Why They Keep Growing on Advisors)
The Investment Company Institute (ICI) consistently does an outstanding job of tracking and providing data for the fund industry, among a great number of other indispensable resources and general education that the organization offers. Among the more closely watched areas in the ETF industry, especially among ETF pundits and some more vocal observers, are fund flows into ETFs.
The Real Passive Inflows Story
For a considerable period of time, ETFs have experienced consistent inflows, whereas mutual funds have realized mostly steady outflows. One rather straightforward way to interpret this trend is to recognize an embrace of passive investing. On the other hand, this trend perhaps more strongly shows that users of passive ETFs have essentially moved active investment decisions from dedicated financial professionals to individuals who are not qualified to actively manage assets. Finally, not to discount the dedicated investment professionals who employ beta ETFs in their practice, they do so as part of their active investment process for clients.
Upon reviewing asset growth reports released in ICI’s “2017 Investment Company Fact Book,” some numbers jumped out. The total assets under management of all U.S.-traded ETFs stood at $2.19 trillion in April 2016. By April 2017, the total net assets in ETFs grew to $2.839 trillion, a growth of $648 billion — certainly an impressive number.
