Over 80% of advisors surveyed in North America now use ETFs. This number has more than doubled in the last decade. Here’s how they are doing it and why, and from whom they may be taking their lead.
ETFs have democratized our investing industry, providing access to asset classes and strategies previously only accessible by large and sophisticated institutions. Now, advisors are beginning to manage money similar to their institutional counterparts, enjoying the scale they provide as well as their versatility and low cost. The top three applications cited for employing ETFs are Core Allocations, Diversification, and Tactical Adjustments.
Thirty years ago, access to core asset classes was the predominant benefit of ETFs. Today, it is still important for advisors and institutions, both of which increasingly use beta building blocks to construct the core of their portfolios. With the wide variety of ETFs now available, investors can tap previously hard-to-access asset classes such as emerging market debt and global sector exposure.
Advisors and institutions are using Strategic Beta ETFs to mitigate risks and provide much-needed diversification, particularly in a market with increasing sector concentrations.
While institutions have long utilized ETFs for the more tactical tasks, advisors are now following suit. ETFs now populate rebalance levers and liquidity buckets, for managing cash flow and as placeholders for tax strategies.
ETFs have been our industry’s largest innovation in recent times. The versatility and scale they provide should continue to contribute to the broad, multi-channel proliferation of the ETF revolution.