Vanguard, long known for its index funds and selling direct to consumers, has been developing exchange-traded funds that many believe are specifically targeted to brokers and financial advisers--a departure in distribution strategy, MarketWatch reports.

Indeed, Paul Lohrey, a principal with the company, said demand for ETFs from financial advisers has been rising, although sales to individuals still dominate the company's fund flows. Over the past two years, Vanguard has added staff to reach intermediaries, he added.

In just the past few weeks, Vanguard has launched a mid-cap growth ETF and a mid-cap value ETF, while filing to offer a dividend-focused ETF and one that tracks the FTSE. Meanwhile, it has adjusted the index for an emerging-markets ETF.

Brokers and financial advisers like ETFs because they can earn commissions when their clients buy and sell them, whereas they have traditionally shied away from passive index funds, noted Dan Wiener, editor of the newsletter The Independent Adviser for Vanguard Investors. "Vanguard has a whole new 'customer-based' marketplace they're marketing to," Wiener said.

Jim Wiandt, editor of the Journal of Indexes, agreed: "With narrowly focused mid-cap growth and value ETFs, you're going after financial advisers, not Joe Investor."

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