Top 5 ETF trends to watch

ETFs have long been popular with investors for their ability to offer exposure to the market by passively tracking a specific benchmark or theme. It’s not uncommon for the funds to make up as much as 52% of an investment portfolio, according to financial services data firm Broadridge Financial Solutions.

“Most people can’t really deal with the volatility” of investing in mutual funds or directly in stocks, said chief investment strategist Lance Roberts of RIA Advisors. “ETFs extract out some of the emotionality.”

But passive ETFs are no longer the only game in town, as funds emerge with portfolio managers actively selecting stocks in a specific theme or sector. These active ETFs often lack transparency, so both investors and advisors need to be more hands-on as well.

Read more: ETFs are hands-off investments? Think again 

“Free” model portfolios may allow advisors to spend less time on investment management and more time on financial planning. But expenses, performance and conflicts of interest should be considered, according to researchers.

Asset managers recommend ETFs that they're affiliated with more often than they do funds that they’re not tied to, even though the latter have lower fees and better performance, according to a recent study from the University of Utah, the Norwegian School of Economics and Shanghai University of Finance and Economics.

“Simply grabbing a free model and walking away from it assuming ‘it is in good hands’ is a disservice to clients,” said advisor Kashif Ahmed of American Private Wealth. “A little cynicism would be warranted and beneficial here.”

Read more: Asset manager models use ETFs with higher prices, lower returns: study 

High-profile board members Martina Navratilova and Barney Frank were not enough to prevent LGBTQ Loyalty Holdings' LGBTQ + ESG100 ETF from being liquidated after less than one year in a challenging market.

The fund joins the ranks of several ETFs that have been closed so far this year, highlighting the difficulties advisors and their ESG-focused clients face when seeking to align portfolios with socially conscious investing.

To be sure, some startup ETFs with social or political roots have fared well, including Adasina Social Justice All Cap Global ETF and Invest Vegan. For financial planner Lindsey Young of Quiet Wealth, success in LGBTQ investing lies in finding what she called “ETFs with methodology that’s more focused on companies that perform best on social metrics specifically.”

Read more: An LGBTQ equality fund’s liquidation and the future of social criteria