Asset Management

Retail Financial Advisors And Their Model Portfolios Propel ETF Assets

RIAs are expected to continue to lead the way

Connect with the latest trends and developments in the retail and institutional asset management marketplace across the Americas in a new report from Cerulli Associates. Access the report here.

June 25, 2024, BOSTON—Exchange-traded fund (ETF) asset growth during the past decade has been nearly unparalleled among commonly used investment vehicles within the U.S. The retail client channel adoption of ETFs by end-investors and financial advisors is a primary driver of the vehicle’s growing marketshare, according to the latest Cerulli Edge—The Americas Asset and Wealth Management Edition.

As of year-end 2022, the retail financial advisor intermediary channels collectively owned $4.3 trillion, or 66%, of total ETF assets. The wirehouse ($1.2 trillion) and the independent registered investment advisor (RIA) ($1.1 trillion) channels are the two largest retail financial advisor intermediary segments in terms of ETF assets, collectively accounting for more than $2.2 trillion in total ETF assets.

Going forward, financial advisors broadly report increasing use of the ETF, regardless of channel. RIAs are expected to continue to lead the way, with independent RIA advisors forecasting a 39% allocation to ETFs, while hybrid RIA advisors estimate a 32.7% allocation. Independent broker/dealers (IBDs) expect to see allocations near 22%, while wirehouses anticipate staying close to 20%.

Further catalyzing ETF flows are asset allocation model portfolios—where ETFs have cemented placement as an important building block. According to Cerulli, asset managers and third-party strategist model providers have an approximate 54% asset-weighted average allocation to ETFs. While just 12% of financial advisor assets are held within practices that primarily use model portfolios as their portfolio construction process, Cerulli estimates there are 24% of assets within practices that are considered model portfolio targets. “The industry will continue to see model adoption as wealth manager home offices push advisors toward them—and advisors realize the resulting benefits,” says Matt Apkarian, associate director.

“Overall, firm resources including model portfolios and external sponsor models all have the potential to influence advisors and further spur ETF adoption. Given the industry movement toward model portfolios, ETF providers should seek opportunities for placement within proprietary and third-party model portfolios. 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,” he concludes.




About Cerulli Associates
For over 30 years, Cerulli has provided global asset and wealth management firms with unmatched, actionable insights.
Headquartered in Boston, Cerulli Associates is an international research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development. Our analysts blend industry knowledge, original research, and data analysis to bring perspective to current market conditions and forecasts for future developments.


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