Supporting the rapid growth of the exchange traded fund industry, a larger number of registered investment advisors, or RIAs, have come to appreciate the benefits of the nifty investment vehicle and plan to increase their exposure ahead.
According to a recent Wealth Management report on RIA investment trends as of the end of 2016, ETFs remain a popular investment vehicle, with only 15% of advisors indicating that they do not use ETFs for clients.
Among the most attractive attributes of the ETF tool, the cost advantage appears to resonate with RIAs as the most important factor in adoption. About 69% of those surveyed indicated that fees were the main reason for ETF usage, followed by targeted sector exposure, transparency, taxes, trading, benchmark tracking accuracy and style exposure.
“In total, the responses illustrate a wide variety of ETF characteristics that increasingly allow RIAs to customize the exposure that fits with their clients’ risk profiles and time horizons,” according to a Wealth Management note.
Sector plays and core investments remain the most important strategic role within ETF client portfolios, but more specific or targeted ETF plays are seeing lower utilization rates.
Looking ahead, 50% of RIAs anticipate greater usage of ETFs over the next three years, a level consistent with past survey results.
“Overall, these responses paint a picture of exchange traded funds continuing to gain share at the expense of other types of investment vehicles, but given the significant usage of ETFs already the rate of increase should be expected to slow going forward,” according to Wealth Management.
Many also look to Morningstar as their go-to source for ETF-related research, with Morningstar.com and Mroningstar ETF usage at 54% and 42%, respectively. Other resources that RIAs look to include Lipper’s service at 9% and ETF Trends at 12%, and competitors ETF.com and ETF Guide were used by fewer RIAs.
RIAs and investors are becoming more knowledgeable about the ETF investment tool. Only 17% and 20% of advisors stated they have below average knowledge of ETF liquidity and ETF Trading, respectively. Additionally, intraday indicative value calculation and distribution schedules were both notable areas of improvement in advsior knowledge.
For more information on the ETF industry, visit our current affairs category.