Active or passive? It depends where you work

Active or passive? It depends where you work
Over the past two years, confidence in passive investing has grown mainly among RIAs while other advisers primarily remain active.
JUL 13, 2015
When it comes to financial advisers, active vs. passive isn't really a debate about money management. It comes down to where they work. The fast growth of exchange-traded funds has sparked debate about everything from the rise of fee-based advisers to the wisdom of shunning active managers to the future of mutual funds. But a study released this week shows that actively managed mutual funds remain firmly at the center of the way financial advisers manage client money.

Mutual funds: the one thing most advisers use

Sources: Market Strategies International, Cogent Reports, Advisor Brandscape, June 2015.

The data is based on an annual Cogent Reports study that asked a representative sample of 1,390 U.S. advisers who manage more than $5 million how they allocate their clients' money. The 2015 data was collected from January to March.

On average, advisers put a third of client assets in mutual funds, but they've lost market share to ETFs

Source: Market Strategies International, Cogent Reports, Advisor Brandscape, June 2015.

This year, almost all RIAs sold ETFs

Source: Market Strategies International, Cogent Reports, Advisor Brandscape, June 2015.

Yet the study found that the substantial growth of ETFs, which now manage $3 trillion globally, has not been completely at the expense of active management, at least according to advisers. While ETFs generally track indexes, they can be traded actively.

RIAs put substantially more clients assets in passive investments in 2015

Source: Market Strategies International, Cogent Reports, Advisor Brandscape, June 2015.

But most advisers still kept more than two-thirds of their clients “active”

Source: Market Strategies International, Cogent Reports, Advisor Brandscape, June 2015.

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