Zerocommission ETFs could spur practice changes: Cerulli

The widespread move to zero-commission trading for exchange-traded funds is likely to increase adviser adoption of this type of fund and spur other changes in adviser practices, a new report from Cerulli Associates finds.

The Boston-based research firm said that with zero-fee trading now the norm among most custodians, advisers’ primary objection to ETF allocations — cost — has been eliminated.

Decreased trading expenses will enable advisers to pursue portfolio objectives once associated with high transaction costs, such as tax-loss harvesting and strategic rebalancing, said Cerulli, which expects advisers to allocate more to ETFs for exposure to niche asset classes.

“For the 51% of advisers who indicate that tax planning is a key service offering, ETFs offer opportunities to minimize tax obligations of their clients,” the firm said in a release.

Cerulli’s research indicates that more than one-quarter (27%) of advisers did not allocate to ETFs in 2019, citing client concern over cost as a primary objection.

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