ETF Industry Growth Creates Need for Advisor Support

Is the explosive popularity of ETFs among the financial planning community creating an opportunity for a new breed of asset management wholesalers?

According to a new report from Cerulli Associates, the steady migration of assets out of mutual funds and into exchange-traded funds will require additional handholding between ETF issuers and financial advisors, which represent the biggest users of ETFs.

At approximately $35 trillion, mutual funds are still more than three times the size of the $10 trillion U.S. ETF industry, but the trend is undeniable.

Cerulli’s research shows that by 2026, more of their clients’ assets will be invested in ETFs than in mutuals funds.

ETFs have been heavily adopted by the wirehouse and independent registered investment advisor channels, which combined make up more than half of retail ETF assets, according to Cerulli.

The migration toward ETFs, which is being fueled ease of use, liquidity and lower fees, is being fed by ETF issuers with waves of increasingly innovative strategies.

This is where the opportunity and need arises for ETF issuers to step up efforts to help advisors navigate the evolving landscape.

ETF Growth Means Advisors Need Support

As financial advisors are forced to continue to upgrade service offerings to compete for clients against lower-cost and digital offerings, wholesalers will be welcomed with open arms, Daniil Shapiro, Cerulli director, said in the report.

“Advisors often do not have time to independently conduct consistent and in-depth product research and wholesalers can create lasting relationships with advisors by becoming a source of product expertise,” he said. “As ETFs rise in popularity across new asset classes, asset managers should invest in ETF specialists to ensure they provide the product expertise advisors expect and value.”

Cerulli’s research finds client-approved educational or marketing materials are also highly valued by advisors. Asset managers offer ETF education via their wholesale teams and specialists, and Cerulli recommends advisors take advantage of their home office's product information and guidance as they seek to expand their ETF use.