Financial Advisors Propelling ETF Surge: Study 

Exchange-traded fund (ETF) asset growth has expanded dramatically over the last decade, owing to greater acceptance by advisors and clients, according to a report by Cerulli Associates, forecasting that advisors are expected to continue growing their use of ETFs. 

As of December 31, 2022, the retail advisor intermediary channels had a collective ownership of $4.3 trillion, which accounted for 66% of the total assets in ETFs. According to Cerulli, the wirehouses and independent RIA channels are the two biggest segments for retail financial advisor intermediary in ETF assets, with $1.2 trillion and $1.1 trillion respectively. 

Although ETFs have “experienced extraordinary asset growth during the past decade, the drivers of that growth, in terms of investor adoption, have not been uniform,” the research firm said in its Cerulli Edge – The Americas Asset and Wealth Management Edition report. 

Financial advisors anticipate a rise in their utilization of ETFs, regardless of the platform they operate on. According to Cerulli, RIAs are projected to be the leading channel for ETFs in terms of percentage of allocations. Independent RIA advisors anticipate that 39% of their allocations will be in ETFs, while hybrid RIA advisors estimate a 32.7% allocation. 

Independent broker-dealers (IBDs) believe that their allocations will be approximately 22%, while wirehouses plan to maintain allocations around 20%. Cerulli stated that ETFs have become a crucial component of allocation model portfolios, which have a significant impact on the ongoing flow of ETFs. 

“The industry will continue to see model adoption as wealth manager home offices push advisors toward them – and advisors realize the resulting benefits,” according to Matt Apkarian, associate director at Cerulli. “We expect the ETF to feature more heavily in model portfolio construction as newer products begin to hit their three- and five-year track records, which are typically required for consideration.”