According to BlackRock, the ETF model portfolio market is anticipated to hit $120 billion by the end of 2015. Some venture capitalists are expecting the model portfolio to be a mainstream investment soon.
A major challenge that model portfolios are experiencing is that providers may not have enough resources to sell their products. Assets are hard to gather and even those firms with a sales force find it difficult to distribute.
An ETF model portfolio can also be hard to sell because the performance of the portfolio is hard to discern. Many of the products are so new to market that a track record or performance history is not available. This is also a kink in the marketability thus far, but over time this will take care of itself. [Managed ETF Portfolios]
As investors are turning their heads away from traditional mutual funds, the ETF model portfolio may take the place of them. A model ETF portfolio is less expensive, with only management fees, more transparent, and present fewer potential conflicts of interest.
Tisha Guerrero contributed to this article.