Financial Advisors Embrace Mutual Fund to ETF Conversions

As mutual-fund-to-ETF conversions mount, financial advisors could not be happier about the trend, one that the CEO of the first company to do such a conversion believes will continue apace. 

“It’s the way the whole industry is moving,” Jim Atkinson, CEO of Guinness Atkinson Asset Management, told etf.com by phone. “It’s the best way for the investor.” 

Atkinson’s firm in Pasadena, California made that first mutual-fund-to-ETF switch in March 2021. 

According to the 2023 J.P. Morgan Global ETF Handbook, there have been 16 such conversions during the past year. The total number of mutual-fund-to-ETF conversions so far is around 40, with nearly $60 billion in assets. The largest conversion during the past year was the JPMorgan International Research Enhanced Equity ETF (JIRE), which currently has $5.8 billion in assets.  

“These successful conversions are likely to open the door to more fund managers following the same path in the future," the J.P. Morgan Handbook noted.  

ETFs vs Mutual Funds 

Asset managers recently have been favoring ETFs over mutual funds, according to the consultancy Cerulli Associates, which said 79% of those polled believe ETFs offer a solid investment opportunity. 

Not all conversions, however, are smashing successes. According to Bloomberg, 61% of the converted funds have drawn less than $10 million each, and more than a third have posted net outflows since they made the switch. 

Yet financial advisors remain focused instead on the successful ETFs’ benefits for investors: no minimums, easy access and tax efficiency. 

“These conversions illustrate movement toward what investors are asking for,” Joey Loss, CFP, of Flow Financial in Jacksonville, Florida, told etf.com in an email. “By converting an existing well-known mutual fund into an ETF, fund managers can maintain the track record and history of the fund, while transitioning it into the investment vehicles desired by investors.” 

Angela Dorsey of Dorsey Wealth Management in Torrance, California, told etf.com that she has been strategically moving her higher net worth clients from mutual funds to ETFs within their taxable accounts. Now, she wants more ETFs to choose from. 

She may get her wish, if Jason Ware’s admonition reaches the right ears. The chief investment officer of Albion Financial Group in Salt Lake City said: “If you’re a fund company and you wish to stay relevant, you must adjust your sails to capture the tailwind.” 

Follow Michelle Lodge on Twitter @lodgemich