ETFs have been growing in popularity in rece❀nt years and this year’s offered some great insights into t🥀he top ETF and advisory trends for the year ahead.  

One o🌞f the key topics discussed by subject matter experts from Vanguard, Schwab, and Fidelity (among others) is how the shift toward zero𝕴 commissions is changing the way financial advisors are guiding their clients. 

Zero-Commission Trading Offers New Op🍒po🙈rtunities for Advisors

ꦏThe race to zero commissions has been a big theme over the past few months, and the growing trend toward low-cost ETFs has been one of the key reasons behind it. So it’s no surprise that experts from across the industry are focused on how ETFs will be viewed by investors and advisors moving forward. “I think it’s phenomenal that the commissions hav𝄹e been removed as a barrier to consideration for advisors,” says , head of ETF Product Management for Vanguard. Powers believes that this shift will prove beneficial for advisors since the lack of fees will limit the cost considerations they need to think about. 

However, he cautions that the new model—and the mul♏tiple ETF offerings that are increasing as a result—means that advisors will need to be more diligent when it comes to researching products. “The idea of doing more homework from a due diligence standpoint is going to matter a lot more than saving yourself one basis point,” he explains, emphasizing that successfully managing ETF investments🌟 is about understanding the components of each new ETF product and how they compare to other products in the market. 

Fidelity’s agrees. As head of ETF Management and Strategy, he believes that the most important thing advisors can do is to provide value to their clients🍨. Offering his views on the importan𒁃ce of zero-commission trading, he explains that, “Anytime you can bring value, it's the right thing to do.”

Advisor-Fee Models Are Likely to Change Along with Brokerage🐽 Models

But while zero commissions can offer significant opportunities for advisors, they can also present some chall😼enges. These include the need to demonstrate consistent returns to clients, as well as the need to re-evaluate advisor-client fee structures. , chief investment officer and director of research at , believes that one of the likely outcomes is a shift toward fee-only advisory models. 

According to Nadig, one of the key reasons for this is that the lack of commissions is going to make it easier for clients to scrutinize the other costs associated with advisory services. “I think it’s going to put some focus on the core revenue model for the advisory business,” he explains, emphasizing that this will likely change the way advisors price their services, anജd the value they’re able to provide. “I think a fee and retainer model is the way that the business is going to go—not tomorrow, not six months from now, but over the coming years I think we’re go🍬ing to see that.”

The Bottom Line

Despite varied insights on top ETF trends, the experts we spoke with all agreed on the importance of the client experience. “Within asset management, the way we're approaching it is, 'How do we create outcomes for our clients that allow them to achieve the experience that they're looking for, rather than just putting a whole bunch of widgets in front of them?'” says Shanna Weber, VP Asset Management Strategy at Schwab. This is especially important since Schwab has led the race to zero commissions, yet it still generates 30% of its revenue from financial advice and other client services. 

Weber believes that providing a holistic experience that takes a client’s individual needs and goals into account is the key to successfully maintaining advisor-client relationships moving forward. “I do believe we can monetize that because people are willing to pay for simplicity, for guidance, for trust, for self-assurance, and for the ability for them to get the outcome they're looking for.”

While 𝕴there are likely to be more changes to advisory services in the years ahead, client experience remains a top priority and the cornerstone of a successful practice.