Advisers like ETFs, just not that much

More financial advisers are now using exchange-traded funds than ever, but these investments still have a long way to go before they'll occupy a significant chunk of clients' portfolios. A new report from Cerullia Associates finds that while half of financial advisers now include ETFs in their clients' investment mix, just 5% of clients' assets are invested in these vehicles. It's a surprising divide between adoption and actual portfolio allocation to the investments, noted Cindy Zarker, director of research at Cerulli. But there appears to be a relatively simple explaination: “It's all about active management,” Ms. Zarker stated. Advisers, she explained, are still married to the type of active management that for years has only existed in the traditional mutual fund world. And even though more ETF providers are developing actively managed strategies, financial advisers want to see more than just press releases about new product launches before dipping a toe in actively managed waters, she said. “Many financial advisers are all saying the same thing about actively managed ETFs,”Ms. Zarker said. “Until we see a track record, we won't go anywhere near them.”