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- Two thirds of financial advisors using ETFs using smart beta
- Advisors utilising smart beta younger with more AUM in ETFs and alternatives
- More than 70% of advisors adopting more than one smart beta approach
FTSE Russell, the global index provider, today issued research findings showing that 68% of financial advisors using ETFs are incorporating smart beta investment products into their client portfolios.
According to FTSE Russell’s first US retail financial advisor market survey - Smart Beta: 2015 survey findings from U.S. financial advisors - advisors utilizing smart beta products tend to be younger, have a higher share of AUM in ETFs and alternative investments, and have practices which extend beyond the core activities of investment selection, asset allocation and financial planning.
In addition, the survey found that registered investment advisors (RIAs) are more likely than regional, independent and wire house advisors to be aware of the term “smart beta.” Notably, more than 70% of financial advisors who adopt smart beta utilize more than one product, with dividend, high quality, equal weight and fundamental the most popular products.
Rolf Agather, Managing Director of North America Research for FTSE Russell, said:
“Factor-based and alternatively-weighted indexes have transformed the investment landscape. It is clear that retail advisors are embracing investment products based on these indexes as a way of incorporating new ideas into their clients’ portfolios. Our findings indicate that retail financial advisors view smart beta as an important portfolio tool for addressing investment challenges.”
Summary of Key Findings:
Advisors are using “smart beta” strategies, even if they are not always familiar with the term
- Without the help of descriptive examples, 35% of advisors reported having used a smart beta investment product yet, when prompted by specific product names, 68% identified themselves as users
- When shown examples of smart beta investment products, 89% of non-users of smart beta expressed an interest in trying these products
- Advisors express an interest in using smart beta investment products to protect portfolios in down markets, control volatility and increase alpha, objectives often associated with active management
Dividend, high quality, equal weight and fundamental smart beta approaches are most popular
- Advisors are most likely to use a smart beta approach that weights companies by historical dividend yield, with 36% adopting this type of smart beta investment product and 35% interested in using it
- High quality (27%), equal weight (26%) and fundamental (23%) are the next most widely used smart beta investment products after dividend
- More than 70% of financial advisors using smart beta apply more than one type of approach
Smart beta-using financial advisors younger, more holistic and have RIA designations
- Advisors using smart beta investment products tend to be younger and have a higher share of assets in ETFs and alternative investments
- Advisors using smart beta investment products are more likely to have practices that extend beyond the core activities of investment selection, asset allocation and financial planning
- 46% of RIAs provided unaided affirmation of using investment products based on smart beta indexes, compared to 32% for other types of financial advisors
About the Survey:
FTSE Russell partnered with Greenwald & Associates to conduct its first survey on smart beta perception and usage among retail financial advisors. To be eligible for the study, which was conducted in June 2015, advisors had to have more than $20 million in assets under management, at least 4% of assets invested in ETFs and at least 20% in fee-based annual revenue.
There were 307 survey respondents drawn primarily from wire houses (29%), regional broker dealers (23%), RIAs (23%) and independent broker dealers (21%). Ninety-nine percent of respondents had more than five years experience as a financial advisor and 84% had more than 10 years experience. Eighty-one percent of respondents manage more than $50 million and 52% manage more than $100 million.
