The recently adjusted broker-dealer exemption rule could make the brokerage community one of the most successful markets for exchange traded funds (ETFs). The basis of the rule revolves around brokers having to register as investment advisors and increasing disclosure to their clients.
The mind-set was already shifting due to the drift away from broker-dealer commissions to fee-based platforms. This will reverse the way ETFs were viewed just a few years ago by brokers. David Hoffman for InvestmentNews reports that now brokers are shifting billions of dollars from fee-based accounts into advisory accounts, and the ETF industry will become a big part of this shift. If a brokerage firm is going to run a program and charge a 1% fee for advice, then ETFs could become the investment of choice because they are the lowest-cost vehicle to the most diversified market exposure. The brokerage community is the largest focus for most ETF providers today.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.