The explosive growth of ETFs over the past decade has fundamentally changed the wealth management industry in several ways.

For asset managers it has led to a distinct bifurcation between low-cost beta-tracking and higher-cost alpha-seeking products as managers find it increasingly difficult to sell actively managed funds that, upon inspection, are closet index strategies. Slightly higher cost factor-based strategies (so-called smart beta) call into question whether much of the historical alpha of many active managers was really just taking easily reproduced factor bets.

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