Financial advisors use of ETFs is at an all time high
Cogent Wealth reports that 76% of US financial advisors are now selling ETFs, up 68% vs 2014. It also states that advisors have exhibited a growing interest in smart-beta ETFs, and are expected to increase allocations further at the expense of mutual funds as they become more familiar with the investment vehicles. RIAs are turning toward low-cost investments, like ETFs, as the sector shifts toward fee-based advisory businesses from commission-based services.
As the exchange traded fund industry grows, more financial advisors are beginning to utilize the investment vehicle to gain market exposure.

Reflecting financial advisors’ shift toward low-cost and passive index-based strategies, the number of advisors who reported selling ETFs is at an all time high, according to Cogent Wealth Reports.

Specifically, 76% of advisors are now selling ETFs, a significant jump from 68% of advisors in 2014. Cogent points out that the rising interest was driven by a significant increase in usage among registered investment advisors and bank advisors. ETF adoption remains highest among RIAs and National wirehouse advisors. RIAs, though are the only channel with a higher percentage of advisors selling ETFs at 93%, compared to 86% for mutual funds.

The rising popularity of ETFs coincides with a shift away from commission-based advisory businesses to more fee-based businesses where RIAs would normally charge a percentage fee based on overall assets managed. Consequently, many advisors are turning toward low-cost ETF investments – the average expense ratio for ETFs is 0.53% and the cheapest ETFs come with a 0.04% expense ratio.

Meanwhile, over the past year, average allocations to ETFs also rose to 14% from 11%.