Ease of use, lower expense ratios and transparency are among the many reasons that financial advisors have become big advocates and users of exchange-traded funds, according to an online survey sponsored by OppenheimerFunds and conducted recently by ThinkAdvisor.com.
The advisor poll focused on advisors’ usage, strategies and other trends related to ETFs, which are estimated to have some $3 trillion in assets under management worldwide.
Overall, 90% of survey respondents say they use index (or passive) ETFs in client portfolios, 54% employ active ETFs, and 50% rely on smart beta ETFs.
The survey finds that nearly two-thirds of advisors, or 63%, offer ETFs in all client portfolios, while more than half, or 57%, use them specifically for cost effectiveness in smaller portfolios or when investment fees are a major factor for clients.
Also, three-quarters, or 75%, of respondents say they use non-cap-weighted ETFs now, and most of these advisors plan to use more of these products over the next year or two.
Ninety percent of advisors (or more) rank low expense ratios, trading ease/liquidity, transparency and diversification as their top reasons for using ETFs. Low tracking error and garnering alpha are seen as important, too, with 74% of advisors or more stating that these factors influence their use of the product.