Investors seem to be piling on to the ETF bandwagon.
Half of investors recently surveyed by The
Charles Schwab Corp. say they plan to increase their holdings of ETFs over the next year, an increase of 9 percentage points from a year ago.
In fact, 9% of investors now hold 50% or more of their portfolios in ETFs, up from just 4% of investors last year, according to the online survey of 1,003 individuals conducted in August.
Costs and fees continue to be critical factors for investors when making ETF buying decisions, the survey found.
“Investors are ready to move beyond a rudimentary understanding of ETFs and get into the nitty-gritty details on things like costs and taxes,” Beth Flynn, vice president of ETF platform management at Schwab, said in a statement.
Three in 10 investors (31%) say they still need to know more about ETFs before they invest more in them, Schwab said. Redemption fees or other “hidden fees” are the most important cost factor for investors, ahead of expense ratios and commissions, the survey found.
The redemption-fee question is a dig at Fidelity and TD Ameritrade Inc., which charge a trading fee for commission-free ETFs sold within 30 days of purchase. Schwab, which expanded its list of no-commission ETFs earlier this year, does not charge for early exits.
“If they trade commission-free, investors want [it to be] commission-free, period,” Ms. Flynn said in an interview.
Schwab, which expanded its ETF OneSource list of no-commission products earlier this year, does not charge for early exits.
The company currently offers 113 ETFs from six sponsors, including Schwab, on its no-transaction fee platform, Ms. Flynn said.
RIAs who hold assets in custody at Schwab are directing about half of their ETF asset flows to the no-fee program, which is a bit more than what the company sees from individual investors, Ms. Flynn added.
Ms. Flynn said expansion of ETF OneSource seemed to be driving increased flows. The firm officially has a 12% market share of ETF assets but it has captured 17% of flows since the February launch of the expanded program, she said.
The company held $179.3 billion in ETF assets in custody as of the end of September. Schwab’s propriety ETFs have $14.2 billion in assets.
The survey quizzed investors between 25 and 75 with at least $25,000 in investible assets who purchased ETFs, or had considered purchasing ETFs, in the past two years. Survey respondents were not asked to indicate whether they had accounts with Schwab.
