Financial Advisors Plan to Increase Use of ETFs in Clients' Portfolios Over the Next Year
Survey Results Show Convenience and Liquidity Rank as Top Advantages of Fixed Income ETFs for Retail Investors1
NEW YORK, Oct. 25, 2012 (GLOBE NEWSWIRE) -- Guggenheim Investments, the investment management division of Guggenheim Partners, today announced the results of a survey of financial advisors who attended the Morningstar ETF Invest Conference in Chicago. The results found that 78 percent of financial advisor respondents plan to increase their use of ETFs in retail investors' portfolios over the next year. Meanwhile, twenty percent of advisors are unsure whether they plan to increase use and only one percent does not plan to increase their use of ETFs over the next year.
Nearly three quarters (seventy-one percent) of advisors believe convenience and liquidity are the biggest advantages to incorporating fixed income ETFs into retail investor portfolios. While sixteen percent of financial advisors cite low costs as the biggest advantage, the remaining thirteen percent say transparency and tax advantages are the biggest benefits of using fixed income ETFs in retail client portfolios.
"The results from the survey at Morningstar indicate a growing appetite amongst financial advisors to incorporate ETFs into retail investors' portfolios over the next year," said William Belden, Director of Product Development at Guggenheim Investments. "While the anticipated tax changes in 2013 may not have an immediate impact on ETF industry growth, there will be implications for how advisors are managing their clients' portfolios. The potential benefits of fixed income ETFs, such as liquidity and convenience, will be a significant impetus to advisors' increased usage of fixed income ETFs."
Among the most significant obstacles preventing greater adoption of fixed income ETFs by financial advisors is market environment. The current low interest rate situation was cited as the leading challenge facing fixed income ETF adoption (forty-one percent) followed by economic uncertainty (twenty-seven percent). Credit risk, market volatility and potential tax changes are of lesser concern to advisors.
Tax Changes A Concern for Both Investors and Advisors
With the election looming, there is much talk about the potential impact of the 2013 tax changes on their investor returns. Advisors share those concerns. According to survey respondents, thirty-five percent of financial advisors are helping their clients prepare by educating them about the tax implications to their portfolios. Thirty-one percent of financial advisors are waiting to see what happens with the tax laws before making any changes to their clients' investments. The remaining advisor respondents are taking advantage of tax loss harvesting (thirteen percent), taking gains this year at a potentially lower rate (eleven percent) or moving their clients into lower tax structured products (eleven percent).
"ETFs provide access to virtually every market segment, in a cost-effective and tax-efficient manner, and represent a key evolutionary development in the growth of the asset management industry," said Anthony Davidow, Managing Director and Portfolio Strategist at Guggenheim Investments. "We anticipate that ETF usage will continue to expand over the next year as more financial advisors embrace their cost-effective structure. ETF growth and evolution will likely come from product innovation, broader acceptance from advisors, and the growth of model builders."
1The survey was conducted onsite by Guggenheim Investments at the Morningstar ETF Invest event, with 55 advisors (out of the approximately 200+ financial advisors in attendance) being surveyed.
About Guggenheim Investments
Guggenheim Investments represents the investment management businesses of Guggenheim Partners, which consist of investment managers with approximately $130 billion in combined total assets.* Collectively, Guggenheim Investments has a long, distinguished history of serving institutional investors, ultra-high-net-worth individuals, family offices and financial intermediaries. Guggenheim Investments offers clients a wide range of differentiated capabilities built on a proven commitment to investment excellence. Guggenheim Investments has offices in Chicago, New York City and Santa Monica, along with a global network of offices throughout the United States, Europe, and Asia.
Guggenheim Investments offers investors a broad range of ETPs—domestic and international equity, fixed-income and currency—to provide the core building blocks for portfolios, access to hard-to-reach market segments, as well as targeted investment choices.
* The total asset figure is as of 06.30.2012 and includes $10.7B of leverage for Serviced Assets. Total assets include assets from Security Investors, LLC, Guggenheim Partners Investment Management, LLC ("GPIM", formerly known as Guggenheim Partners Asset Management, LLC; GPIM assets also include all assets from Guggenheim Investment Management, LLC which were transferred as of 06.30.2012), Guggenheim Funds and its affiliated entities, and some business units including Guggenheim Real Estate, LLC, Guggenheim Aviation, GS GAMMA Advisors, LLC, Guggenheim Partners Europe Limited, Transparent Value Advisors, LLC, and Guggenheim Partners India Management. Values from some funds are based upon prior periods.
ETFs may not be suitable for all investors. ● Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than original cost. Most investors will also incur customary brokerage commissions when buying or selling shares of an ETF. ● Investments in securities and derivatives, in general, are subject to market risks that may cause their prices to fluctuate over time. ● ETF Shares may trade below their net asset value ("NAV"). The NAV of shares will fluctuate with changes in the market value of an ETF's holdings. In addition, there can be no assurance that an active trading market for shares will develop or be maintained. ● Tracking error risk refers to the risk that the Advisor may not be able to cause the ETF's performance to match or correlate to that of the ETF's Underlying Index, either on a daily or aggregate basis. Tracking error risk may cause the ETF's performance to be less than you expect.
Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC. Securities offered through Guggenheim Funds Distributors, LLC and Rydex Distributors, LLC. Rydex Distributors, LLC and Guggenheim Funds Distributors, LLC. are affiliated with Guggenheim Partners, LLC.