Advisors, comfortable with the idea of incorporating exchange traded funds into investment strategies, are beginning to shift entirely into ETF products, creating ETF Model Portfolios. However, as the use of ETFs proliferates, there is a greater need to educated would-be investors.

ETF Model Portfolios are investment packages entirely comprised of ETFs. The model portfolios are seeing more demand than ever, with total assets between $25 billion to $100 billion and growing at a rate of 40%, writes Adam Patti at InvestmentNews. Pattis the chief executive of ETF manager IndexIQ.

As advisors utilize ETF Model Portfolios, fund providers need to increase education on their ETF products so that the advisor community knows what they are getting themselves into, Patti said.

Model portfolios comprised of ETFs help provide alternative themes or strategies to better reflect an client’s risk profile and target investment plan. Still, the models are only good if the ETFs work as expected, and with the number of new ETFs coming to market, Patti noted that advisors may have a hard time sorting through competing performance claims.

Consequently, advisors should clearly understand the ETF models and their investment style and strategies, including equities, fixed-income, international investments, alternatives and commodities.

Investors seeking to better scrutinize ETF models will soon be given a helping hand from Morningstar, as the firm is trying to research and rank ETF Managed Portfolios for the masses. [Morningstar Announces Research and Ranking of ETF Managed Portfolios]

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

Max Chen contributed to this article.

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.