Could active ETFs act as a client acquisition magnet?

Financial professionals aiming to grow their practices may benefit from offering active exchange-traded funds, particularly when targeting younger generations of investors, according to new research from Capital Group.

In a survey conducted between December 2024 and January 2025, nearly half of Gen Z, millennial and Gen X investors (45 percent) said they would be more likely to choose a financial professional who includes active ETFs in their investment approach.

"Millennial and Gen X investors are roughly twice as likely to mention diversification as a benefit of active ETFs, compared to low fees," Capital Group's research said, indicating potentially lower price sensitivity among those groups than what advisors might expect.

The study, which included responses from more than 800 advisors and 1,200 investors, also pointed to a disconnect between investor preferences and advisor assumptions. While many financial professionals cited the limited track record of active ETFs as a barrier, this concern did not resonate as strongly with investors. Instead, younger investors with $100,000 to $1 million in investable assets reported both awareness and a growing appetite for the strategy.

"Incorporating active ETFs into their practices as a well-defined part of client prospecting could be a growth differentiator," the report said.

Differences also emerged in how investors and advisors perceive the key benefits of active ETFs. Investors ranked diversification, high return potential and ease of trading as their top three reasons for choosing active ETFs. In contrast, advisors emphasized low fees, liquidity and diversification.

And while tax efficiency came up as a top three benefit for financial professionals working with Baby Boomer clients, Capital Group found it's not a highly ranked benefit among many investors, particularly Boomers.

Capital Group is just one of the many asset managers pushing further into the active ETF arena in recent years. Earlier this month, the firm, which has a strong claim as the world's largest active asset management firm, launched a suite of model portfolios built from its own in-house active ETFs.

On Thursday, T. Rowe Price also added two new active transparent equity ETFs to its own active shelf, T. Rowe Price Hedged Equity ETF (THEQ) and T. Rowe Price Capital Appreciation Premium Income ETF (TCAL), expanding its lineup to 13 active equity ETFs and six fixed income ETFs.

Meanwhile, Allspring launched its first active ETF strategies,  the Allspring LT Large Growth ETF (AGRW) and Allspring Special Large Value ETF (ASLV),  building on its December ETF debut with three active bond ETFs.

The wider active ETF space is going through a robust boom period. Globally, assets invested in active ETFs hit $1.26 trillion in February, according to ETFGI, with year-to-date net inflows reaching a record $103.69 billion. Active strategies accounted for almost half of all ETF net inflows in 2024, despite representing only 8 percent of total ETF assets.

Another recent report by EY noted 482 active ETFs were launched in the US in the first ten months of 2024, compared with 144 indexed ETF listings. Analysts there estimate that global assets under management in active ETFs could reach $4 trillion by 2030.