In another sign of the rise of exchange traded funds, registered investment advisors are increasingly using ETFs in client portfolios.
“RIAs’ use of ETF products rose 27% annually over the past five years, and accounted for $170 billion of the channel’s total assets as of Dec. 31, 2012,” reports Mason Braswell for InvestmentNews, citing according to a new study by Cerulli Associates.
Add to that, nearly half of RIAs are expected to increase their use of ETFs, according to InvestmentNews.
Advisors are not just relying on traditional market cap-weighted ETFs, either.
“Advanced beta strategies are playing a more influential role in some of the world’s largest portfolios. Forty-two percent of investors currently use advanced beta and another 24 percent plan to do so over the next three years,” according to a study by State Street Global Advisors, the second-largest U.S. ETF sponsor. [Smart Beta ETFs Are Booming]
Earlier this year, Cogent Research and Invesco’s (NYSE: IVZ) PowerShares unit, the fourth-largest U.S. ETF issuer and one of the leading purveyors of smart beta funds, said a quarter institutional decision makers indicate they are already using smart beta ETFs, implying significant room for growth. Speaking of growth, “over the next three years, institutions plan on increasing their use of smart beta ETFs more than any other category (including market-cap weighted ETFs),” according to PowerShares and Cogent. [Advisors Increasing Use of Smart Beta ETFs]
ETF providers are meeting increased demand from advisors with more than just new products. For example, Charles Schwab (NYSE: SCHW) last year introduced its commission-free OneSource ETF platform that initially featured 105 ETFs from several providers on a commission-free basis. From February 2013 through the end of the third quarter, nearly half the inflows to OneSource came from RIAs. [Advisors Embrace Commission-Free ETFs]
OneSource now features 121 ETFs on a commission-free basis. In 2013, ETF assets custodied at Schwab surged 29% to $196 billion compared with industry growth of 26%, according to the firm’s “ETF Investor Snapshot” released last month.
ETF Trends editorial team contributed to this post.