The exchange traded fund universe has quickly expanded, with around 2,000 U.S-listed products trading on the market. Driving the current growth spurt, a number of factors like the rise of ESG investments, growing millennial investor group and expanding advisor base have helped bring the ETF industry to where it is today.
Shaun Wurzbach, Global Head of Financial Advisor Channel Management at S&P Dow Jones Indices, spoke with Tom Lydon, Editor and Publisher of ETF Trends, to talk about the evolving ETF ecosystem, explore where advisor interest is focused, and where index and ETF innovation best meet advisor needs.
Wurzbach pointed out that financial advisors have been a huge supporting factor in the rapid growth of ETF assets.
“We look at everything going on in the world today – especially with technology, innovation, transparency; All of this comes down to the advisor level,” Lydon said. “Your average client has more information.”
Given the ease of access to digital information, investors are able to better judge the various investments, and more are quickly finding out that the low-cost, easy-to-use ETF investment vehicle is the right choice.
“When you look at everything ETFs have to offer, it lines up perfectly with that, and arguably, maybe the best invention in the financial services space in the last fifty years,” Lydon said.
We are seeing that a number of investors who have grown weary of costly and underperforming active strategies turn to cheap index-based funds, like ETFs, that promise to efficiently and cheaply help anyone track broad market returns.
“If you can’t beat the market, why not buy the market for virtually nothing these days,” Lydon said.
As ETFs grow in popularity, more money managers and even mutual fund providers are jumping into the game. However, they need to separate themselves from the leading or more established competitors in the space. Consequently, more new providers are increasing innovation by differentiating themselves from bigger funds through things like targeted smart beta offerings.
“They have to be unique in terms of reaching advisors in something that advisors want,” Wurzbach said.
For more information on the ETF industry, visit our current affairs category.