ETFs Dominate as Advisors and RIAs Shift Away from Mutual Funds
Financial advisors and Registered Investment Advisors (RIAs) are increasingly favoring Exchange-Traded Funds (ETFs) over mutual funds, marking a significant shift in investment preferences. According to a recent ISS Market Intelligence report, 60% of advisors now prefer ETFs when choosing between identical strategies in different wrappers, up from 53% in 2022. Conversely, mutual fund selection has dropped to just 10%, half its previous rate. RIAs demonstrate the strongest bias toward ETFs at 80%, driven by demands for transparency, cost efficiency, and tax benefits. While wirehouse advisors remain the exception by preferring Separately Managed Accounts (SMAs) for high-net-worth customization, ETF adoption is growing even in this channel. Additionally, FUSE Research indicates that standalone ETFs remain preferred over new ETF share classes tied to mutual funds, with 51% of advisors favoring the former due to simplicity and liquidity. Operational hurdles and fee compression concerns limit the appeal of share classes. This trend highlights a structural change in portfolio construction across mainstream advice channels, with ETFs solidifying their role as the dominant investment vehicle despite regulatory innovations aiming to bridge the gap between mutual funds and ETFs.
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ETFs Dominate as Advisors and RIAs Shift Away from Mutual Funds
Financial advisors and Registered Investment Advisors (RIAs) are increasingly favoring Exchange-Traded Funds (ETFs) over mutual funds, marking a significant shift in investment preferences. According to a recent ISS Market Intelligence report, 60% of advisors now prefer ETFs when choosing between identical strategies in different wrappers, up from 53% in 2022. Conversely, mutual fund selection has dropped to just 10%, half its previous rate. RIAs demonstrate the strongest bias toward ETFs at 80%, driven by demands for transparency, cost efficiency, and tax benefits. While wirehouse advisors remain the exception by preferring Separately Managed Accounts (SMAs) for high-net-worth customization, ETF adoption is growing even in this channel. Additionally, FUSE Research indicates that standalone ETFs remain preferred over new ETF share classes tied to mutual funds, with 51% of advisors favoring the former due to simplicity and liquidity. Operational hurdles and fee compression concerns limit the appeal of share classes. This trend highlights a structural change in portfolio construction across mainstream advice channels, with ETFs solidifying their role as the dominant investment vehicle despite regulatory innovations aiming to bridge the gap between mutual funds and ETFs.
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