Use of ETFs by wirehouses will continue to grow over the next two years, with 61% of wirehouse advisors using ETFs through the rep-as-portfolio manager model, and nearly another third using ETFs through the firms' home-office ETF models, according to recent research by Cerulli Associates.
Despite wirehouses' increasingly rigorous due diligence process, use of ETFs by wirehouse advisors will further increase ETF asset growth, Cerulli found in its latest report, U.S. Exchange-Traded Fund Markets 2016: Strategies for Broadening Adoption.
"Despite ranking after RIAs in terms of percentage of advisors' portfolio allocation to ETFs, wirehouse firms hold the largest percentage of ETF assets compared to any other intermediary channel," Jennifer Muzerall, associate director at Cerulli, noted in a statement. "We anticipate advisor allocation to ETFs to increase, on average, another 3% over the next two years."
Muzerall adds that growth of fee-based advisory platforms has been a "big driver" of flows into ETFs. "The scale and efficiency these platforms create have brought awareness to many advisors about the fees they are paying for active management."
Cerulli notes in its reports that discussions with several of the largest wirehouse firms confirms that ETF usage is up and is estimated to grow from a 13.5% advisor allocation to 17% by 2018. The recent growth of fee-based advisory platforms has been a big driver of increased ETF allocations.
Overall advisor ETF usage rate continues on an upward trend, increasing from 11.2% in 2015 to 12.6% through first-quarter 2016, Cerulli notes. Since 2008, advisors' allocation to ETFs has more than doubled, the Boston-based consulting firm found.
Indeed, recent research by the Money Management Institute found that after years of steady growth, wirehouse alternative investment assets fell about 4% in 2015 from $205 billion to $195 billion with "all of the decline" attributable to a $12 billion drop in liquid alternative mutual funds and ETFs.
