ETFs Changing the Way Advisors Do Business, According to State Street and Wharton Study
June 10 2008 - 11:30AM
Business Wire
State Street Global Advisors (SSgA), the investment management arm
of State Street Corporation (NYSE: STT) and Knowledge@Wharton, the
online business journal of The Wharton School at the University of
Pennsylvania, today announced the results of a joint survey
exploring the impact of exchange traded products on the financial
advisory business. According to the survey of 840 investment
professionals, sponsored by State Street and SPDR University, State
Street�s new on-line educational resource, 67 percent identified
ETFs as the most innovative investment vehicle of the last two
decades and 60 percent reported that ETFs have fundamentally
changed the way they construct investment portfolios. �Exchange
traded products have become an increasingly vital investment
vehicle for financial intermediaries,� said Anthony Rochte, senior
managing director of State Street Global Advisors. �By
incorporating exchange-traded products into sector rotation,
core-satellite, tax management, and portfolio completion
strategies, advisors are simultaneously managing costs and risk,
which helps underscore their value proposition and strengthen
relationships with clients.� Asked about the greatest potential
growth arena for ETFs, 43 percent of advisors cited 401(k) plans
and 27 percent singled out actively managed ETFs, a product that
has only recently been introduced in the marketplace. The top five
most appealing characteristics of ETFs, as ranked by financial
advisors include: 1. Low cost; 2. Liquidity; 3. Intraday trading;
4. Tax efficiency; and 5. Investment style purity. When asked about
the greatest disadvantages of ETFs, 69 percent of the advisors
surveyed cited their, �unknown/untested indexes and/or portfolio
methodologies� or the, �overwhelming number of choices.� �The pace
at which new ETFs and indices are entering the market is clearly a
concern,� said Rochte. �In light of these findings and the
increasing importance of understanding index methodologies, the
role of responsible product development and educational support
cannot be overstated.� Additional survey findings include: Nearly
four-in-five advisors (76 percent) believe the use of ETFs
encourages fee-based models. While a majority of financial advisors
(76 percent) identified themselves as light-to-moderate users,
indicating that less than 50 percent of their portfolios utilize
ETFs, just 4 percent report they do not use the instruments at all.
Some 60 percent of respondents said they knew what exchange traded
notes or ETNs are while 29 percent indicated that they plan on
increasing their use of ETNs in the future. Only 31 percent of
advisors are currently using inverse ETFs, which allow investors to
bet against a market index. However, nearly 40 percent report that
they plan to increase their use of inverse ETFs in the future. A
report featuring the findings of this joint survey titled, The
Impact of Exchange Traded Products on the Financial Advisory
Industry is available to financial professionals registered at
www.spdru.com. About State Street Global Advisors State Street
Global Advisors, the investment management arm of State Street
Corporation (NYSE: STT), delivers investment strategies and
integrated solutions to clients worldwide across every asset class,
investment approach and style. With $2 trillion in assets under
management at March 31, 2008, State Street Global Advisors has
investment centers in Boston, Hong Kong, London, Montreal, Toronto,
Munich, Paris, Singapore, Sydney, Tokyo and Zurich, and offices in
27 cities worldwide. For more information, visit State Street
Global Advisors at www.ssga.com. About SPDR� University SPDR
University is a FREE online educational resource dedicated to
providing investment professionals with the education and training
they need to stay ahead of the market and be precisely in turn with
their clients. Log on to SPDR University to access rich educational
content and start earning CE credits anytime, from anywhere.
Download client-ready materials, webcasts, interactive
presentations, succinct materials, audiocasts, and research papers.
To register, go to www.spdru.com today. About Knowledge@Wharton The
Wharton School of the University of Pennsylvania is committed to
sharing its intellectual capital through Knowledge@Wharton, the
school�s online research and analysis journal. Knowledge@Wharton
offers free access to analysis of current business trends,
interviews with industry leaders and Wharton faculty, articles
based on the most recent business research, conference overviews,
book reviews, links to relevant content and a searchable database
of more than 2,000 articles and research abstracts. Launched in May
1999, Knowledge@Wharton has evolved into a network of websites,
with over 1.2 million subscribers across 200 countries. About the
Wharton School The Wharton School of the University of Pennsylvania
� founded in 1881 as the first collegiate business school � is
recognized globally for intellectual leadership and ongoing
innovation across every major discipline of business education. The
most comprehensive source of business knowledge in the world,
Wharton bridges research and practice through its broad engagement
with the global business community. The school has more than 4,600
undergraduate, MBA, executive MBA, and doctoral students; more than
8,000 annual participants in executive education programs; and an
alumni network of more than 82,000 graduates. Note to Editors:
SPDR� Exchange Traded Funds SPDR ETFs are a comprehensive family
spanning an array of international and domestic asset classes.
Offered by State Street Global Advisors, SPDR ETFs provide
professional investors with the flexibility to select investments
that are precisely aligned to their investment strategy. Recognized
as the industry pioneer, State Street�in partnership with the
American Stock Exchange�created the first ETF in 1993 (SPDR S&P
500 � Ticker SPY). Since then, we�ve sustained our place as an
industry innovator through the introduction of many ground-breaking
products, including first-to-market successes with gold,
international real estate, international fixed income and sector
ETFs. SPDR ETFs are managed by SSgA Funds Management, Inc, a
registered investment adviser and wholly owned subsidiary of State
Street Bank and Trust Company. ETFs trade like stocks, are subject
to investment risk and will fluctuate in market value. Frequent
trading of ETFs could significantly increase commissions and other
costs such that they may offset any savings from low fees or costs.
The �SPDR�� trademark is used under license from The McGraw-Hill
Companies, Inc. (�McGraw-Hill�). No financial product offered by
State Street Corporation or its affiliates is sponsored, endorsed,
sold or promoted by McGraw Hill. Investors should consider the
investment objectives, risks, charges and expenses of the fund
carefully before investing. A prospectus that contains this and
other information about the fund may be obtained by calling
866.787.2257. Please read the prospectus carefully before
investing. Diversification does not protect against loss.
Distributor: State Street Global Markets, LLC, member FINRA, SIPC.
ALPS Distributors, Inc., a registered broker-dealer, is distributor
for SPDR shares, DOW Diamonds and Select Sector SPDRs, all unit
investment trusts. 10895-0609
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