Report: RIA Use Of ETFs On The Rise

by on September 15, 2009

According to a recent report from Boston-based Financial Research Corporation, financial advisers are becoming increasingly comfortable with ETFs, and may turn to exchange-traded products as the market outlook improves. According to the new study, wirehouses and registered investment advisers have the highest comfort level with ETFs, with 82% and 76%, respectively, indicating that they are somewhat comfortable or very comfortable with exchange-traded financial products.

The study showed that regional and independent broker/dealers are less comfortable with ETFs, but many still plan to use ETFs with increasing frequency going forward.

In August, total ETF assets reached $672 billion, a gain of about $23 billion over the previous month and more than $75 billion higher than the same month a year ago. So far, the industry has cash inflows of about $54 billion on the year, already topping 2008 total inflows of $45 billion.

ETFs became popular initially as a favorite tool for retail investors, but in recent years issuers have focused their attention on educating financial advisers of the advantages of ETFs over traditional actively-managed mutual funds (visit out Financial Advisor & RIA Center for more details). It appears now as if these efforts are beginning to pay off, as professional money managers embrace tactical asset allocation strategies and low cost alternatives to pricey mutual funds.

Expect these trends to continue in future years as an increasing number of ETFs make their three- and five-year anniversaries and become eligible for Morningstar star ratings (and other widely-accepted indicators of fund quality) that advisers consider when making investment decisions.