Of those advisers that have adopted ETFs, about 15% of their clients’ assets are in the funds. In that group of advisers, 40.1% indicated they did not increase their allocation in the prior 12 months, with 3.9% decreasing their allocation over the same period.
“Although there has been tremendous growth with this product, our survey reveals that there is still a sizeable market that has yet to adopt ETFs within their client portfolios,” says Hari Krishnaswami, FA Vision Product Manager. “Even those advisers who have adopted this product have yet to allocate significant assets.”
The survey also revealed the following:
- Adoption rates of ETFs varied by channel; 94.9% of advisers with traditional wirehouses have adopted ETFs versus only 36.8% of advisers with insurance companies.
- Independent registered investment advisers (RIAs) were the most comfortable committing client assets, putting an average of 26.7% of assets under management in ETFs.
- Holding times on average are 1/3 less for ETFs than mutual funds. Advisers, on average, hold ETFs for 22.2 months versus an average of 36.0 months for mutual funds.
“Overall, while it is clear that ETFs have taken hold with advisers, there is still plenty of opportunities for ETF providers to win new business and increase existing allocations,” Krishnaswami added. “60.3% of advisers who use ETFs believe they are a fit for both growth and income portfolios, highlighting the potential to move beyond a niche allocation.”
The results are based on kasina’s and Horsesmouth FA Vision survey, which gathered 768 responses between March 15 and March 23, 2011.