RIAs Held Nearly $4T in ETF Assets in 2024

Exchange-traded funds are overwhelmingly the investment vehicle of choice for registered investment advisers, as 81% of RIAs surveyed by ISS Market Intelligence last year said they preferred them.

Only 11% of responding RIAs said they preferred separately managed accounts, and 8% preferred open-end mutual funds, according to analysis of September 2024’s ISS MI Advisor Pulse Series, which focused on investment vehicle preferences. ISS MI, like PLANADVISER, is owned by ISS STOXX.

The enthusiasm for ETFs is mirrored in investment allotments. By year-end 2024, RIAs held about $3.99 trillion in ETFs, representing 38.5% of total ETF assets, according to Form 13F filings collected by ISS MI MarketPro. The vast majority—$3.55 trillion—were in passive ETFs, representing 37.5% of all passive ETF assets. While RIAs had less than 11% of their ETF assets in active ETFs, those assets still totaled $434 billion, 48.5% of all active ETF assets.

RIA assets in ETFs had more than doubled in two years, growing to $3.99 trillion from $1.79 trillion in 2022. ISS MI wrote that RIA preferences “stayed relatively consistent over time,” as 80% of RIAs preferred ETFs in 2021.

ISS MI found that 57% of all advisers surveyed last year said ETFs were their preferred vehicle, up from 53% in 2022. ETFs were also preferred by 57% of surveyed regional, independent and bank advisers, while respondent wirehouse advisers had split preferences, as 45% chose ETFs and another 45% chose SMAs.

Advisers who preferred passive ETFs told ISS MI their top reasons for doing so included low fees (shared by 85% of respondents) and tax efficiency (60%). Those who preferred active ETFs told ISS MI their top reasons included low fees (57% of respondents), tax efficiency (54%) and active management (44%).

The ISS MI Advisor Pulse Series compiled results from more than 800 interviews with U.S.-based financial advisors in July 2024.