All types of managed money solutions used by fee-based advisors are expected to grow over the next two years, but the use of ETF-managed accounts will far outpace adoption of other solutions.
In fact, on a net basis the proportion of fee-based advisors expecting to increase their use of ETF advisory/wrap accounts (23%) is three times the proportion who expect to increase their use of mutual fund advisory/wrap accounts (7%). These and other findings are included in the Advisor Trends in Managed Accounts, a Cogent Reports study from Market Strategies International.
Three quarters (76%) of fee-based advisors now use a managed account solution within their practice, accounting for 61% of their total AUM. Mutual fund wrap programs and Rep as Advisor models are the most cutilized advisory platforms. However, over the next two years, growth for each platform will be slowed due to significant proportions of advisors who will no longer use these solutions. By contrast, almost a quarter (24%) of fee-based advisors plan to increase their use of ETF wrap accounts, while almost none (1%) said they plan to limit use.
“From a practical standpoint, the use of ETF wrap accounts is still relatively new, but considering the tremendous demand for ETF products there is certainly room for growth,” said Meredith Lloyd Rice, senior product director and author of the study in a statment. “The proliferation of ETF products and investment strategies make building a managed solution around these products quite attractive to advisors, especially as they become more comfortable with ETFs in general. However, in today’s fee conscious environment, advisors and providers alike will have to monitor the all-in’ ETF wrap account cost given a penchant for lower expenses among advisors and investors.”