Advisers look in the bargain bin when choosing ETFs

Advisers look in the bargain bin when choosing ETFs
A survey finds that cost is the most important factor for advisers when selecting exchange-traded funds. Service? Not so much.
JUL 12, 2011
ETF providers may not be thrilled with this bit of news. According to a new study released by kasina LLC, cost is the most important factor financial advisers consider when choosing an exchange-traded fund. And advisers' quest for lower costs will put an even greater squeeze on ETF providers, the consultancy found. Lowering prices may not be so easy in an already crowded marketplace. Currently, profit margins average a mere 19 basis points, according to kasina. What's more, cost may be important to advisers, but it's not the only advantage they expect from their ETF providers, said Steven Miyao, chief executive of kasina. The second-most-important factor for advisers when picking an ETF is liquidity. That was followed by transparency and tax efficiency, according to the survey. One thing that was missing from the list? Service and support. But that doesn't mean advisers don't expect it, Mr. Miyao said. “There are a lot of fringe benefits that advisers don't think about,” he said. “Consumers say they aren't influenced by advertising, but we know that there are things we are subliminally influenced by.” For ETF providers to sell their products effectively, they need to know their audience, Mr. Miyao said. The kasina report identifies three segments of advisers: those who do not use or understand ETFs, those who use ETFs from a number of firms, and those who work with one or two firms consistently. For ETF providers that are facing low margins and more competition, segmenting the advisers is the only way to be successful, according to kasina. “It is very hard for ETF players to compete,” Mr. Miyao said. “If you can't compete on price, then you need to differentiate yourself with how you interact with advisers.”

Latest News

Newsom wants nationwide billionaires tax as presidential bid may loom on the horizon
Newsom wants nationwide billionaires tax as presidential bid may loom on the horizon

“It’s time for an economic reset,” wrote the California governor, in a post on X.

Maryland regulators spank fledgling art-focused RIA Masterworks over registration snafus
Maryland regulators spank fledgling art-focused RIA Masterworks over registration snafus

Masterworks was launched in 2017 but its RIA, Masterworks Advisers, is just three years old.

Investors allege Miami operator took over $1.5 million in EB-5 scheme
Investors allege Miami operator took over $1.5 million in EB-5 scheme

One 2017 form, no broker license, and a $42 million gap they say surfaced on a webinar.

Gen X, millennials lag in retirement confidence amid knowledge gap
Gen X, millennials lag in retirement confidence amid knowledge gap

Fewer than half of Americans in their peak earning years feel on track for retirement, while many say limited financial knowledge and access to professional guidance are holding them back.

Advisor moves: Veteran-led UBS team overseeing $460 million migrates to Merrill
Advisor moves: Veteran-led UBS team overseeing $460 million migrates to Merrill

Meanwhile, Wells Fargo hauled advisors overseeing $825 million in the West Coast, while Wedbush has welcomed a seasoned professional from Stifel in California.

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income

SPONSORED Why direct indexing stopped being optional

Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.