“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.