Liquid Alternatives: Advisers Sitting on Trillions of Dollars of Potential ETF Investments – Report

February 24, 2020 | Liquid Alternatives

A report on how advisers buy ETFs finds there is enormous scope for further adviser-directed investments into ETFs.

A survey by ETF Trends and ETF Database titled “How Financial Advisors Buy ETFs” found that more than half (or about 63%) of advisors said that the percentage of Exchange Traded Funds in their clients’ portfolios were below 40%.

“Projected across the entirety of advised assets, this implies there are still Trillions of dollars in addressable assets for ETF issuers to pursue,” the report said.

This is especially important given the enormous change events that took place during 2019. These include record inflows, equity gains of 30%, and the ruthless fee wars leading to zero commissions. The passage of the ETF Rule at the SEC and the advent of ‘stealth’ or non-transparent funds are other changes that rocked the market for issuers of Exchange Traded Funds in 2019. Increasing focus on smart-beta and ESG-related Exchange Traded Funds were also notable trends during the year.

But most of these, in the net result, work in favor of the investor. Therefore, the potential for advisors to move clients in the category of ‘Dabblers’ to the category of ‘Super Users.’

Advisors will nudge clients towards ETFs

Yes, advisors probably understand the scope, and therefore, nearly 57% expect to include ETFs in their allocations over the coming year. The report estimates this will be at a rate of 3X that of mutual funds.

“It seems inevitable that 2020 will be a banner year for the industry,” says the report.

New nuances in advisors’ interactions with issuers

The report found that advisors are avoiding meeting with issuers’ reps – only 10% want to have a face-to-face interaction. The great majority of advisors prefer webcasts or other digital methods of dissemination. (

This preference for ‘digital’ comes from a growing tech capability amongst advisors. A solid 63% of the surveyed advisors considered themselves ‘sophisticated’ in the use of technology. Moreover, 20% considered themselves ‘highly sophisticated.’

In what must be an eye-opener for issuers, centrally issued ‘home-office’ portfolio recommendations cut little ice with advisors. Almost 81% use some sort of model portfolios, while 47% create their own model portfolios.

“Today’s financial advisor has been forced to become more sophisticated and tech-savvy in order to compete… ETF issuers need to adapt too,” says the report.

Related Story:  Bank of America: ETF Assets to Go 10X, Hit $50 Trillion in 10 Years

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