The distribution model for exchange traded funds has changed in the digital age, with more individual investors and financial advisors taking the time to look through strategies and utilizing the investment tool on their own.
Nevertheless, while the ETF industry has enjoyed a boom as more investors adopt the nifty tool, there is still a lot of room to grow.
“There are actually more advisors who could stand to use ETFs – 25% of all advisors don’t use ETFs today,” Rich Powers, Head of ETF Product Management, Vanguard, said at the Inside ETFs conference.
“Even if you think about the 75% who do, only 14% to 15% of their portfolios are in ETFs, so there’s upside there. Maybe, even more exciting is the individual investor – only 10% of their assets are held in ETFs,” he added.
Many have come to rely on ETFs for their ease of use through a basic brokerage platform and low fees. Vanguard has benefited from this shift in investor demand toward low-cost index-based funds as the ETF provider offers some of the cheapest broad beta strategies around.
For example, the Vanguard Total Stock Market ETF (VTI), which tries to reflect the performance of the CRSP US Total Market Index, an index comprised of U.S. large-, mid-, and small-cap equity diversified across growth and value styles, comes with a dirty cheap expense ratio of 0.03%.
Investors have also been investing with costs in mind, shifting toward cheaper ETFs like those offered by Vanguard. Consequently, Vanguard is now the second-largest ETF provider with $963 billion in assets under management.
Watch Rich Powers Discuss ETF Industry Growth
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