How do advisors choose among ETFs? According to the latest and fifth annual U.S. ETF Investor Survey published by Brown Brothers Harriman, in partnership with ETF.com, an ETF's expense ratio is the number one variable advisors and institutional investors consider when choosing funds.
Of the 360 investment professionals surveyed — three-quarters were RIAs, brokers or accountants — 64% said expense ratios were the most important element when choosing among ETFs. That's not surprising, given that 53% of respondents said their fiduciary obligation to clients was key to evaluating investment products.
It was the first time in the five-year history of the survey that expenses took the lead role in ETF selection.
"This reflects a continuation of the trend toward low-cost investing that has been underway for some time," said Shawn McNinch, global head of ETF services at BBH, in a statement. "It makes sense when you look at both the asset flows, and the growing ETF fee war," said Dave Nadig, CEO of ETF.com, in the same statement.
After expenses, index methodology (52%) and historical performance (48%) ranked the highest considerations for choosing ETFs overall.
When asked specifically about how they choose among actively managed funds, respondents were even more focused on expense ratios. Eighty-seven percent cited expense ratios as the most important deciding factor, followed by performance (83%) and transparency (52%).
