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Retail Investors Clamor for ETFs as Inflows Grow 19%: Broadridge

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Advisors and investors allocated $469 billion to exchange-traded funds in the 12 months ended Sept. 30, a 19% increase over the previous year, Broadridge Financial Solutions reported Thursday.

Eighty percent of the net new assets came from retail channels driven by advisors, according to data released through Broadridge’s Fund Distribution Intelligence. During the third quarter, retail channels captured 77% of all ETF net flows, $195 billion.

Broadridge said that in the year to the end of the third quarter, RIAs, independent broker-dealers, wirehouse firms and online digital platforms contributed more than $370 billion of net new ETF assets, up 21%.

RIAs accounted for $132 billion, and continue as the biggest holder of ETFs with $874 billion, according to the report.

“Advisors continue to embrace ETFs for client portfolio allocations across both equity and fixed income products,” Frank Polefrone, senior vice president of Broadridge’s data and analytics business, said in a statement.

“The dramatic growth of ETFs is driven by the changing distribution landscape, including the increase in the number of fee-based advisors, as well as the use of model portfolios that primarily utilize ETFs.”

Cerulli Associates recently reported that 53% of RIAs in a study used ETFs for both core and satellite holdings.

According to Broadridge, combined net new assets into funds and ETFs from retail channels were up $854 billion in the 12-month period, compared with $353 billion for institutional channels.

RIAs were the fastest-growing channel for combined fund and ETF assets on an absolute dollar basis, up 14%, or $314 billion.

Net new flows of mutual funds for the online channel increased by 38%, or $183 billion.

The report said Vanguard and Schwab drove the online channel’s growth, offering a broad range of index and lower-fee actively managed funds.

“Even though actively managed funds still control most of the industry’s assets, they’re falling farther and farther behind in the race for new money and new clients,” says Broadridge’s director of fiduciary and compliance research, Jeff Tjornehoj, in the statement.

“The divide is particularly acute in U.S. equity products, which for most investors is the core of their portfolio. Active bond funds — which have been much less threatened by passive products — may start to feel the heat if younger investors continue to follow a passive approach as they get closer to retirement.”

At the end of the third quarter, Schwab took the honors as the top performing robo-advisor.

Vanguard’s founder, John Bogle, recently expressed concern about the firm’s enormous size. Several factors account for Vanguard’s success.

— Check out Overcoming Challenges Tied to ETFs on ThinkAdvisor.