After a year of unwanted regulatory and media scrutiny, exchange traded fund (ETF) providers will be putting more energy into getting investors and financial advisors to better understand the handy ETF investment tool.

Over the next year, ETF providers will be spending more time ensuring financial advisors understand what their ETF products are about and how to use them in client portfolios, writes Jessica Toonkel Marquez for InvestmentNews.

Martha Papariello, a principal with The Vanguard Group Inc., sees that educating advisors is essential as both retail ownership of ETFs increases and new niche ETF products are launched.

ETF providers want to get the point across that there are significant differences between core ETF products and niche offerings such as short and leveraged funds (how to use leveraged/inverse ETFs) or commodities-based ETFs (four types of commodity ETFs).

While the media and regulators have honed in on leveraged, inverse and commodity products, these two ETF products make up less than 10% of the entire ETF market. Jim Ross, senior managing director at State Street Global Advisors, points out that the word ETF encompasses a broad array of products.

Claymore Securities Inc. is using white papers and webinars to disseminate the general practices and structure of ETF investing. ETF Securities, iShares, WisdomTree, ProShares, Direxion and PowerShares also regularly host webinars and publish literature about various ETF products and issues facing the market.

As a result of greater advisor education, advisors will have the information they need to go on and educate their clients about ETFs. This education will also help them make the transition to ETFs away from mutual funds – doing this requires a lot of back office shifting and the education will give advisors the support they need to carry it out.

For more information on ETFs, visit our ETF 101 category.

Max Chen contributed to this article.

Tags: ETF 101