When picking an ETF, advisors still use the same top two criteria they use when picking a mutual fund: correlation with other investments, and then performance. That's just one of the findings from a survey released today by kasina and Horsesmouth through their FA Vision joint venture.

Advisors' ETF selection "mirrors their behavior with other mutual funds," kasina FA Vision product manager Hari Krishnaswami told The MFWire.

Krishnaswami, who joined kasina from DWS Investments on April 11, also noted that advisors' hold time for ETFs is lower than for traditional mutual funds. They hold traditional mutual funds for an average of 36 months, while advisors who use ETFs hold those ETFs for an average of only 22 months (and half of advisors using ETFs hold those ETFs for less than a year).

The survey included 768 responding advisors from wirehouses, insurance broker-dealers and independent RIAs and was conducted online between March 15 and March 23. Other subjects addressed in the survey include advisors' adoption and allocation rates for ETFs.

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Company Press Release

New York, (May 2, 2011) – According to results released today from kasina and Horsesmouth's FA Vision service, 25.8% of advisors surveyed still do not hold ETFs within their client portfolios. Those that have adopted ETFs commit an average of 15.6% of their clients’ assets to them. The results are based on an expansive survey about ETFs that was conducted as part of FA Vision. 768 responses were gathered between March 15 and March 23, 2011.

“Although there has been tremendous growth with this product, our survey reveals that there is still a sizeable market that has yet to adopt ETFs within their client portfolios,” says Hari Krishnaswami, FA Vision Product Manager. “Even those advisors who have adopted this product have yet to allocate significant assets.”

The topical survey, part of the broader FA Vision service, also revealed the following:

• Of advisors who did hold ETF allocations, 40.1% indicated they did not increase their allocation in the prior 12 months, with 3.9% decreasing their allocation over the same period.

• Adoption rates of ETFs varied by channel; 94.9% of advisors with traditional wirehouses have adopted ETFs versus only 36.8% of advisors with insurance companies.

• Independent RIAs were the most comfortable committing client assets, putting an average of 26.7% of assets under management in ETFs.

• Holding times on average are 1/3 less for ETFs than mutual funds. Advisors, on average, hold ETFs for 22.2 months versus an average of 36.0 months for mutual funds.

“Overall, while it is clear that ETFs have taken hold with advisors, there is still plenty of opportunities for ETF providers to win new business and increase existing allocations.” Krishnaswami added, “60.3% of advisors who use ETFs believe they are a fit for both Growth and Income portfolios, highlighting the potential to move beyond a niche allocation.”

About kasina

kasina's commitment to innovating distribution in the financial services industry has made it one of the most influential strategy consulting firms in its sector. kasina works with a wide variety of clients from five continents, including firms representing 90% of the U.S.'s total assets under management. An overview of services offered by kasina is available at www.kasina.com. 

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