NEW YORK, Sept. 20, 2016 /PRNewswire/ -- Financial
advisors are likely to recommend that their clients increase
allocations to exchange-traded funds (ETFs) by 65 percent as a
result of the recent Department of Labor (DOL) Conflict of Interest
Rule, according to a white paper by BNY Mellon, a global leader in
investment management and investment services.
The survey results indicated that advisors in the study
currently have 23 percent of their assets under management in ETFs,
and they plan to boost that allocation to 38 percent over the next
two years as assets are transitioned to ETFs from other products.
That would increase the percentage of assets allocated to ETFs by
65.2 percent. Approximately 55 percent of the 170 advisors polled
by BNY Mellon said they plan to increase their investments to ETFs
because of the rule, which becomes effective in April
2017.
The white paper, Accelerating Growth: The Department of Labor
Conflict of Interest Rule and its Impact on the ETF Industry,
produced by BNY Mellon in association with ETF Trends, was released
today at etfXchange '16, BNY Mellon's annual exchange-traded funds
(ETF) symposium.
"The rule requires financial advisers to recommend investments
that are in the best interests of their clients when they offer
guidance on 401(k) plan assets, individual retirement accounts or
other qualified monies saved for retirement," said Frank La Salla, chief executive officer of BNY
Mellon's Global Structured Products and Alternative Investment
Services business. "This includes emphasizing financial services
products such as ETFs that tend to have lower fees than other types
of investments."
The advisors said they will increase their use of both actively
managed ETFs and passively managed ETFs. They also said they expect
to increase their use of separately managed accounts and decrease
their use of unit investment trusts and annuities. Funding for the
growing products is likely to come at least in part from the
declining products, according to the survey.
La Salla noted that cost will not be the only factor determining
the types of assets that advisors recommend. "The advisor and the
client might be looking to fill a need in an investment portfolio,
such as obtaining exposure to a particular asset class or country,"
he said. "The best product might be an ETF, or it might be a mutual
fund or some other financial product."
While the respondents indicated they expect continuing rapid
growth of ETF assets, they said that changes in three areas are
needed to facilitate this growth. First, the majority of defined
contribution programs will need to upgrade their technology to
trade ETFs, as many do not have this capability. The DOL rule could
accelerate the introduction of the necessary technology as plan
sponsors and advisors will be more motivated to offer these
products.
The other two areas are education and information access.
"The ETF industry will need to accelerate the educational
efforts about ETFs and the DOL rule among industry participants to
smooth the way for projected growth," said Steve Cook, managing director and business
executive for BNY Mellon's Structured Product Services. "As to
accessing information, ETF-oriented advisors tend to favor
accessing research in small bites rather in long documents. They
prefer to learn about new offerings via virtual webcasts rather
than attending conferences or attending sales meetings."
LaSalla concludes that registered investment advisors (RIAs),
like brokers, are likely to give ETFs serious consideration. "Given
the fee-based nature of RIAs, their level of sophistication and
willingness to adopt new strategies to help their investors to
optimize their investments, it would seem natural for them to
embrace ETFs even more."
To access the full report, please click here:
https://www.bnymellon.com/_global-assets/pdf/our-thinking/accelerating-growth-the-dol-conflict-of-interest-rule.pdf
About ETF Trends
ETFtrends.com and its team of editors, writers, and financial
experts work hard to bring the latest news, trends and insights
from the world of exchange traded funds (ETFs). The exponential
proliferation of ETFs provides a wealth of opportunities for
investors who understand their potential. They cover an enormous
range of specific investing possibilities that carry diversified
risk. ETF Trends was born out of the abundant research performed by
asset managers at Global Trends Investments. With decades of
experience in the financial services industry, ETF Trends continues
to identify the advent and evolution of ETFs and their ability to
serve as primary investing tools for individuals. ETF investing
empowers investors to capture sectors, asset classes and global
regions to capitalize on the efficient marketplace while
diversifying for risk. ETF Trends' news stories focus intently on
educating investors regarding specific offerings, current market
trends, sectors, economies and sentiment about every ETF
market.
About BNY Mellon
BNY Mellon has a long history supporting the unique servicing
needs of ETFs and has played a leading role in the development of
procedures and systems integral to some of the first and most
innovative products of the ETF industry. As of June 30, 2016, BNY Mellon supported 35 issuers
offering 619 separate portfolios in the U.S., Europe and Asia with a total of $310 billion in net assets.
BNY Mellon's Asset Servicing business supports institutional
investors in today's fast-evolving markets, safeguarding assets and
enhancing the management and administration of client investments
through services that process, monitor and measure data from around
the world. We leverage our global footprint and local expertise to
deliver insight and solutions across every stage of the investment
lifecycle.
BNY Mellon is a global investments company dedicated to helping
its clients manage and service their financial assets throughout
the investment lifecycle. Whether providing financial services for
institutions, corporations or individual investors, BNY Mellon
delivers informed investment management and investment services in
35 countries and more than 100 markets. As of June 30, 2016, BNY Mellon had $29.5 trillion in assets under custody and/or
administration, and $1.7 trillion in
assets under management. BNY Mellon can act as a single point of
contact for clients looking to create, trade, hold, manage,
service, distribute or restructure investments. BNY Mellon is the
corporate brand of The Bank of New York Mellon Corporation (NYSE:
BK). Additional information is available on www.bnymellon.com.
Follow us on Twitter @BNYMellon or visit our newsroom at
www.bnymellon.com/newsroom for the latest company news.
Contact:
Mike Dunn
+1 732 667
2678
mike.g.dunn@bnymellon.com
Cheryl Krauss
+1 212-635-8176
cheryl.krauss@bnymellon.com
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SOURCE BNY Mellon