Other factors to consider when contemplating TER include replication strategies, product structure, assets under management, performance, liquidity and the bid/ask spread.
A recent study by Chicago-based Spectrem Group revealed that low cost ETFs have attracted high net worth investors (UHNW) on this merit alone. The research firm concluded that 28% of investors own ETFs. Of the ultra high net worth investors, those that are worth $5 to $25 million, minus their primary residence, 47% of such investors use ETFs.
“Wealthier investors are more likely to purchase ETFs,’’ George Walper, President of Spectrem, stated. “They can afford to make initial investments in alternative products.”
Carol Schleif, a regional chief investment officer of asset management for Abbot Downing, a Wells Fargo business that serves UHNW clients, is quick to refute the idea that the prospect of higher upfront loads and 12b-1 fees leads advisors away from ETFs, reports Donald Jay Korn for On Wall Street. “Our clients want the best fee-adjusted and tax-adjusted returns,” she told On Wall Street. “If an ETF will deliver that, we’ll recommend the ETF.” [Fee War Could Hit Specialty, Niche ETFs Next]
Tisha Guerrero contributed to this article.