Exchange-traded funds have multiplied rapidly over the last few years, but FAs still prefer mutual funds. A new Aite Group survey of 440 FAs found that mutual funds represent 25 percent of advisors' assets under management, while ETFs make up just 8 percent. Aite Group analyst Alois Pirker says the underlying issue could very well be that the fee structure of mutual funds is more attractive to FAs; most ETF providers do not pay advisors trailing commissions. In fact, fee-only RIAs, who do not accept commissions, tend to use ETFs more. But Todd Rosenbluth, fund analyst with S&P Capital IQ, says many people still want to try to beat the benchmark, and with ETFs, you're buying the average. “The active management that comes along with mutual funds is still appealing.”
