The exchange traded fund industry has come a long way from its traditional beta index replication methodology. As the industry continues to evolve, financial advisors and investors will be open to greater opportunities and require more education.

“Product development has been rapidly moving beyond the traditional market-capitalization-weighted strategies to active, fundamental, leveraged, commodity, currency and alternative approaches,” Tim Buckley, managing director and chief investment officer at Vanguard, said in an Ignites article. “It is a double-edged sword — greater choice for advisors and investors, but also greater complexity.”

As advisors and investors learn more about ETFs, many have switched to ETFs and other low-cost index funds from underperforming active mutual funds. [Advisors Driving Growth at ETF ‘Big Three’]

“The growth of ETFs has been closely aligned with the growth and evolution of advice. More and more advisors realize that they do not need active funds to create alpha,” Buckley added.

Buckley also warns that investors should monitor their exposure to income generating assets.

“Do not focus solely on yield,” Buckley said. “Investors who reach for the highest yield may find themselves concentrated in a certain sector of the market, such as high-yield bonds or utility stocks, and may not realize the risks that they are taking on.”

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