Financial Advisors Fuel ETF Growth: Report

ETF Trends

Financial advisors in the United States are contributing to the exchange traded fund industry growth, according to a Cerulli Associates study.

“Advisor adoption of ETFs continues to be the foundation of growth for the industry,” said Alec Papazian, associate director within Cerulli’s asset management practice. [A Closer Look at Commission-Free ETF Trading]

Use of ETFs among financial advisors differs, with about two-thirds of those working in large investment houses using ETFs, and about 55% of independent advisors currently using them, reports Chris Flood for Financial Times. The area that ETF usage is slim is advisors linked to banks and insurance companies. In this area, commissions from mutual funds are a nice reward, and since ETFs do not pay these out, they are overlooked.

On average, about 7% of financial advisors’ portfolios are made up of ETFs, compared to 37.4% for mutual funds. And even with independent advisors, the average portfolio has about 13% allocated to ETFs. [Why ETF Assets are Gaining on Mutual Funds]

A recent CitiPrime Finance survey concluded that in the U.S. alone, where retail participation in alternative investment focused mutual funds and ETFs currently stands at $259 billion, new demand will push assets in these vehicles to $770 billion by 2017. Alternative investments were classed as any investment tool besides traditional stocks or bonds.

Scott Helfman for BusinessWire reports that the flexibility witnessed in the mutual fund and ETF sponsors, plus the newer transparency among hedge funds, has created a new demand for alternative investments in mainstream, retail portfolios. [High Net Worth Investors Flocking to ETFs]

Tisha Guerrero contributed to this article. 

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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