MSCI: Advisor Demand Grows for Active ETFs, Customization

A new report from MSCI shows advisors want to step up portfolio management services for clients.

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Jeff_Benjamin
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Wealth Management Editor
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Reviewed by: Paul Curcio
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Edited by: Kiran Aditham

The outlook is bright for ETF issuers as financial advisors and various levels of wealth managers are placing increased dependence on actively managed exchange-traded funds to build client portfolios.

The latest findings from MSCI’s Emerging Trends in Wealth Management Report point to the fast-growing and spreading appeal of the low-cost, liquid, and transparent aspects of ETFs.

Those have long been the hallmark characteristics of ETFs, but the wealth management industry’s sweeping embrace of active strategies looks like the ultimate tipping point for the $10.3 trillion industry.

The MSCI research shows that more than 75% of advisors surveyed said they plan to increase allocations to active ETFs over the next three years. Key to this finding is that the increased use of active ETFs is also expected to populate model portfolios, where active strategies traditionally have been less common.

According to the report, the active ETF market is an emerging yet rapidly expanding market segment, particularly in the U.S., where growth has been driven by mutual fund conversions.

Gaining visibility into these ETFs’ holdings and strategies, and educating clients about them, are important steps toward increasing allocations.

Advisors Must Stay Ahead of Active ETF Demand

The report, based on a survey of 220 wealth management industry professionals, highlights active ETFs as part of the growing trend toward more personalized portfolios, once the exclusive province of the wealthiest investors.

Technology and increasing access to active strategies inside an ETF wrapper are driving the continued development of ways to customize model portfolios.

Alex Kokolis, Global Head of Wealth at MSCI, said financial advisors need to be ahead of the demand in finding ways to help clients customize their investments.

“The demand for personalized portfolios is growing across all client segments, from high-net-worth individuals to emerging affluent investors,” he said. “A broader set of clients now expect personalization in all aspects of their lives, including financial services, driven by trends in other industries.”

Part of that growing personalization is expected to include a migration into private assets, which some of the biggest players in the ETF industry, including BlackRock Inc., are already sizing up for distribution inside ETFs.

Of the advisors surveyed by MSCI, 82% say they plan to increase allocations to private assets over the next three years. However, that increased appetite remains hampered by a general sense among advisors that current solutions for investing in private assets is insufficient.

Further, roughly half of advisors say one barrier to entry is their limited understanding of private assets.

For ETF issuers, however, it presents plenty of opportunity.

Jeff Benjamin is the wealth management editor at etf.com, responsible for coverage related to the financial planning industry. This includes writing, hosting podcasts, webinars, video interviews and presenting at in-person events.


Jeff is a veteran journalist with more than 30 years’ experience covering the financial markets. He has won more than two dozen national and regional awards for his reporting. He most recently worked as a senior columnist at InvestmentNews where he wrote about investment products and strategies, as well as the broader financial planning industry. Prior to that, Jeff worked as an analyst at Cerulli Associates where he researched and wrote reports on the alternative investments industry. Jeff also worked as a money management reporter at Dow Jones Newswires, where he covered the mutual fund industry.


Based in North Carolina, Jeff is a former Marine and has a bachelor’s degree in journalism from Central Michigan University.

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