The U.S. ETF industry has been a center of product innovation, and it has seen assets under management double in the U.S. in the past five years alone. That pace of growth is showing no signs of slowing, and more and more folks are looking to enter this booming space for the first time.
At stake is a piece of what is today a $2.6 trillion U.S. ETF market, and one that Nigel Brashaw, partner at PwC Asset Management Group and the firm’s global ETF leader, projects will be a $3.6 trillion market by early 2018.
Speaking at Inside ETFs Sunday, Brashaw said there are several key developments driving this continued growth in assets under management:
Online Platforms Such As Robo Advisors
The future isn’t firms such as Betterment and Wealthfront getting “huge” as much as its digital advice getting better and better. Robo advice itself—digital advice platforms and services—will drive assets to ETFs.
“In 10 years, if you don’t have a digital strategy, you’ll be challenged as an ETF advisor/sponsor,” he said.
Roughly 50% of ETF assets today in the U.S. are in the hands of retail investors. They have kept up in adopting ETFs, and once they start using ETFs, they buy more and more—that’s what research shows. Retail investors will continue to drive adoption, particularly of new-to-market strategies.
Insurance companies and other institutions have been increasingly looking to get into the ETF space both as users and sponsors. It’s a trend that’s only gathering more steam, he says.
Financial Advisors And Intermediaries
“Regardless of regulations, lower costs and benefits of ETFs will continue to drive adoption,” Brashaw said about this segment. “ETFs are going to keep growing because they are better mousetraps.”