Cogent Syndicated: Established ETF Leaders Fend Off Challengers as Advisors Consolidate Providers

July 31, 2019

In sobering news for new entrants to the ETF market, 2019 marks the first year that advisors report consolidating the number of ETF providers they use. This trend has been evident for some time in the mutual fund market, driven by product rationalization at large broker-dealers combined with a growing preference for low-fee providers. Mutual fund producers report an average of 8.9 provider relationships, a significant decrease from 9.9 relationships in 2017. ETF producers report working with 4.0 ETF providers on average, down from 4.3 in 2018 and 2017. These and other findings are from Advisor Brandscape®, a Cogent Syndicated™ study released by Escalent.

As advisors work with fewer ETF providers and concentrate more of their assets with a primary provider, iShares, Vanguard and State Street Global Advisors uphold a wide lead over the rest of the market in use and consideration. In fact, Charles Schwab Investment Management, known for its value for the money, is the only provider to achieve an increase in the proportion of advisors who have client assets invested with the firm over the past year.

“These findings sound a cautionary note for traditional mutual fund managers getting into the ETF market,” said Meredith Lloyd Rice, vice president at Escalent and author of the report. “A handful of long-established players continue to reign in this category as advisor interest in smart beta and active ETFs is cooling off.”

Amid this increasingly competitive environment, it’s critical that firms address the areas that are most important to advisors. In addition to being seen as a leader in the ETF industry, trust and consistent performance are the most important areas for ETF providers to convey. While few firms distinguish themselves as ETF leaders, a number of managers known for their active mutual funds earn relatively strong ratings for trust.

“Firms looking to launch ETFs will need to find the right fit to distinguish themselves,” said Linda York, senior vice president at Escalent. “Whether it’s leveraging a certain product or expertise in a specific asset class, there are opportunities for asset managers who’ve built a strong reputation in the market to stand out.”

Top ETF Providers–Market Penetration

2019  2018  2017
1 1 1 iShares
2 2 2 Vanguard
3 3 3 State Street Global Advisors/SPDR
4 5 5 First Trust
5 4 4 Invesco*
6 7 6 ProShares
7 6 7 WisdomTree
8 8 8 Fidelity
9 10 11 Charles Schwab Investment Mgmt.
10 11 10 PIMCO

* Brand name changed from PowerShares in 2019
X #9 ranked firm in 2018 and 2017: Guggenheim Investments is now part of Invesco and no longer tracked.
Source: Escalent. Cogent Syndicated™. Advisor Brandscape®. June 2019.

About Advisor Brandscape®

Cogent Syndicated conducted an online survey with 1,531 registered financial advisors from January to March of 2019. In order to qualify, respondents were required to have an active book of business of at least $5 million and offer investment advice or planning services to individual investors on a fee or transactional basis. Escalent sets quota targets and weights the data to be representative of the overall advisor universe using the Discovery Data Financial Services Industry database as a sample source. Escalent will supply the exact wording of any survey question upon request.

 

Click below to learn more about the full Advisor Brandscape report.

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