Despite declining fund use among advisors, US financial advisors are now just as likely to invest new money from clients into exchange traded funds as traditional mutual funds, according to recent survey from Cogent Research.
Cogent has surveyed more than 1,700 US financial advisors and found that almost a quarter (22%) new client dollars went to ETFs while 23% were invested in active mutual funds.
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Advisers surveyed believe that over the past six years, the proportion of advisors selling ETFs has increased dramatically, from less than half (46%) of advisors in 2007 to nearly three-quarters (73%) who use them currently.
Meantime, advisors’ allocations to ETFs have more than doubled, from 5% in 2007 to 12% in 2013.
According to the survey, most of the ETF gains have come at the expense of mutual funds. Also, advisors now say they are as likely to invest new dollars in ETFs as they are to invest in mutual funds.
In the 2012 survey, advisors allocated 19% of new inflows to ETFs while 27% went to mutual funds.
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By GlobalDataCogent findings said it expected the success of passive ETFs to generate more interest in actively managed ETFs.
Meredith Rice, senior product director and author of Cogent’s ‘Advisor Brandscape’ report, said: The shift among US advisors to a fee-based model, where they are paid based on the value of clients’ assets, was focusing attention on costs.
"However, the rules of engagement will change significantly when it comes to how advisors approach selecting actively managed ETFs. And that is where traditional active managers, even those late to the game, may find some real traction.
"The potential pricing issues will certainly give some mutual fund companies pause. But they need to look back over the past six years of ETF history, and ask themselves if they are willing to pass on the next wave of ETFs," Rice added.
