ETF Trends
ETF Trends

As the exchange traded fund industry grows, more financial advisors are beginning to utilize the investment vehicle to gain market exposure.

Reflecting financial advisors’ shift toward low-cost and passive index-based strategies, the number of advisors who reported selling ETFs is at an all time high, according to Cogent Wealth Reports.

Specifically, 76% of advisors are now selling ETFs, a significant jump from 68% of advisors in 2014. Cogent points out that the rising interest was driven by a significant increase in usage among registered investment advisors and bank advisors. ETF adoption remains highest among RIAs and National wirehouse advisors. RIAs, though are the only channel with a higher percentage of advisors selling ETFs at 93%, compared to 86% for mutual funds.

The rising popularity of ETFs coincides with a shift away from commission-based advisory businesses to more fee-based businesses where RIAs would normally charge a percentage fee based on overall assets managed. Consequently, many advisors are turning toward low-cost ETF investments – the average expense ratio for ETFs is 0.53% and the cheapest ETFs come with a 0.04% expense ratio.

Meanwhile, over the past year, average allocations to ETFs also rose to 14% from 11%.

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