The ETF market has surpassed USD11 trillion, driven by a strong equity market and solid organic growth, with USD511 billion in inflows during the first half of 2025, according to Cerulli Associates.
Advisers increasing existing allocations to ETFs is a major factor contributing to ETF asset growth, with 52 per cent of asset managers considering it a major driver and 48 per cent saying it is somewhat of a driver, according to the firm.
In 2024, advisers reported allocating 21.6 per cent to ETFs, up from just 11.2 per cent a decade earlier in 2015. Growth of the ETF has come at the expense of other vehicles (notably the mutual fund) and individual securities. Looking forward to 2026, financial advisers expect their ETF allocation to rise to 25.5 per cent, a higher percentage than their projected allocation to mutual funds for the first time.
“Asset managers have come to value the lower structural cost of ETFs (relative to commission-based mutual fund shares), the tax efficiency stemming from the creation redemption mechanism, and the ability to trade them intra-day on an exchange,” says Kevin Lyons, senior analyst.
Cerulli’s research finds the brunt of rapid advisor adoption is borne within the wirehouse and independent registered investment adviser (RIA) channels, which make up more than half of retail ETF assets (54.6 per cent).
“The wirehouse use is boosted by the sheer scale of the channel, but the independent RIA channel has been pioneering the use of ETFs, thanks to demand for low-cost beta building blocks when assembling client portfolios. RIAs also do not share the same restrictions related to product access that branch network broker/dealers do, so they are more open to using some of the newer ETFs entering the market,” he adds.
Cerulli expects adviser use of ETFs to broaden beyond the core user base within the wirehouse and RIA channels, as advisers become increasingly comfortable with ETFs and their use across asset classes and strategies.
“Asset managers should play an active role in supporting adoption of ETFs by providing product and portfolio construction education,” says Lyons. “This could include investing in roles such as ETF specialists or wholesalers, as well as providing educational and marketing materials to advisors and model portfolio builders,” he concludes.
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