With over $1.2 trillion in assets, the exchange traded fund universe has quickly expanded as investors look for efficient and easy-to-use investment tools. Looking forward, the increasing usage of ETFs will likely come at the expense of the mutual fund industry.
According to a Guggenheim Investments survey of financial advisors, retail investors will be picking ETF products over traditional mutual funds next year, reports Kenneth Rapoza for Forbes. [Growing Interest for ETFs Among RIA Clients: Schwab]
“The results from the survey indicate a growing appetite amongst financial advisors to incorporate ETFs into retail investors’ portfolios over the next year,” William Belden, Director of Product Development at Guggenheim Investments, said in a press release.
Of the respondents, 78% plan to raise ETF allocations in their client portfolios over the next year, whereas only 28% of respondents were unsure about increasing ETF allocations and 1% does not plan add more assets to ETFs.
About 71% of advisors cite convenience and liquidity as the biggest advantage to fixed-income ETFs in retail investor portfolios, 16% point to low costs as the largest advantage and 13% state that transparency and tax advantages are the primary benefits.
“While the anticipated tax changes in 2013 may not have an immediate impact on ETF industry growth, there will be implications for how advisors are managing their clients’ portfolios,” Belden added. “The potential benefits of fixed income ETFs, such as liquidity and convenience, will be a significant impetus to advisors’ increased usage of fixed income ETFs.”
“ETFs provide access to virtually every market segment, in a cost-effective and tax-efficient manner, and represent a key evolutionary development in the growth of the asset management industry,” Anthony Davidow, Managing Director and Portfolio Strategist at Guggenheim Investments, said in the article.
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Max Chen contributed to this article.