RIAs Warm Up to ETFs Not Labeled Vanguard, BlackRock or State Street

There’s more to life than just the Big 3. 

BlackRock, Vanguard and State Street have long dominated the asset management industry with the three largest exchange-traded funds in the world — namely, IVV, VOO, and SPY, respectively — weighing in at around $600 billion in AUM apiece. All told, the fearsome threesome accounted for a combined 74% of the entire equity ETF market last year, according to a US News & World report. 

Independent advisors’ collective response? “Meh.” That’s because new issuers actually gained market share last year among RIAs, who were looking for niche funds to diversify their holdings, according to an annual analysis from AdvizorPro. While BlackRock still topped the charts, the fastest growing newly launched funds were from issuers like Neos Funds, VanEck and Pacer, and focused on active management and factor-based strategies. 

It shows advisors are outgrowing their plain, vanilla funds and are more savvy wielding complex ETF instruments. “The largest issuers like iShares, Vanguard, and SPDR still dominate, but given their size, they naturally have less room for rapid growth,” said Michael Magnan, chief executive of AdvizorPro, adding that over half of ETF positions in portfolios changed in 2024. “Advisors are adding ETFs and actively reshuffling and fine-tuning portfolios as market conditions shift.”

Engaging Warp Drive

While the Big 3 aren’t going anywhere soon, asset managers like JPMorgan, Dimensional, and First Trust are steadily gaining ground, according to the report that leveraged 13F filings to analyze holdings at 4,768 RIAs. The research also found:

• Some 667 new ETFs appeared in RIA portfolios for the first time in the fourth quarter of 2024, meaning advisors are searching for more innovative and niche strategies.
• Despite higher fees, income-focused and options-based ETFs are attracting advisors seeking yield and downside protection in volatile markets.
• More established asset managers are also seeing upticks in adoption with JPMorgan’s JGRO (97.1%) and T. Rowe Price’s TCAF (84.9%) topping the growth charts last year.

“The innovation in ETFs is moving at warp speed,” Magnan said. “For advisors, this shift means more choices and greater flexibility.”

Pick Your Own Adventure. Defined outcome ETFs, also known as buffer or target outcome ETFs, use options to offer downside protection in exchange for capped upside and were big hits last year. Advisors often put their retired clients into the funds to calm any fears over market sell-offs, Magnan said. 

Income-focused clients can also benefit from options strategies that are designed to generate higher levels of income. Alternative ETFs, like commodities and managed futures, are also picking up steam as advisors look for ways to hedge inflation and diversify beyond stocks and bonds. “It’s pretty clear in our analysis that RIAs are viewing ETFs as an integral key to how they are building and managing portfolios,” he said.