CNBC reports that according to a recent survey, advisors are preferencing exchange-traded funds over any other investment choice, in part because of their transparency, liquidity, and low costs. ETFs can also be traded throughout the day and are primarily passive. Their expense ratio is lower than actively managed mutual funds and they offer certain tax benefits. For example, unlike with mutual funds, capital gains are not as likely to arise with exchange-traded funds.
In the 2015 Trends in Investing Survey, conducted by the Journal of Financial Planning and the FPA Research and Practice Institute, 81% of advisors said that they recommend or use ETFs—that’s significantly up from 2006 when the survey found that just 40 % of advisors used exchange-traded funds. Meantime, Morningstar, an investment research firm, reports that ETFs hold about $2.1 trillion of investor assets. However, the use of smart-beta ETFs is still low.