A new trend in ETFs is emerging: large brokerages that have traditionally offered mutual funds to their clients are looking to hop on the bandwagon.
Although the mutual fund industry is about $11 trillion strong, assets have been moving away. Last month alone, $13.2 billion moved out of mutual funds and $4.8 billion went into ETFs, Helen Kearny for Reuters explains.
It’s no surprise then that larger banks – Bank of America (BAC), Morgan Stanley (MS) and Wells Fargo (WFC) – are looking for their piece of the pie. They’ve traditionally offered mutual funds to their clients, but the interest in ETF has grabbed their attention. In November of last year, Schwab jumped into the industry and has seen success.
Unfortunately for them, ETF providers have refused to enter into profit-sharing arrangements with the big “wirehouse” brokerages, which is why the larger wirehouses have not been pushing their advisers to incorporate ETFs into their portfolios.
The solution as the wirehouses see it? Analysts suspect they’re looking into creating their own ETFs.
Clearly, the wirehouses know that ETFs are no passing fad at this point. The industry is here to stay. To sit on the sidelines is to lose out on commissions for sales of ETFs and assets that could come in to any proprietary ETFs. Although pricing competition is intense at this point, they’d rather earn a little money than none at all, according to one analyst.
Tisha Guerrero contributed to this article.