Say goodbye to mutual funds?

Posted by: Lauren Young on December 7, 2007

Are darker days ahead for the mutual fund industry?

Mutual funds are expected to suffer declines in the product mix used by financial advisers by more than 10% by 2009, according to a new report.

Advisor Product Forecast, which was released by Cogent Research on Dec. 7, says:

Advisors, armed with better technology and more product options, and tasked by clients to be productive wealth managers, are more readily exploring newer investment vehicles to best meet individual client needs. And within this landscape is a need for advisors to expand their own revenue channels by buying and recommending investment products that serve clients well and can be executed within the growing fee-based environment. While advisor use of specific products varies by channel, the research shows that advisors are often conflicted by the need to select more sophisticated products that match clients’ complex needs, but challenged by their ability to explain these complex products to clients.

Investment products expected to see the most dramatic increase in market share include separately managed accounts (SMAs) and exchange-traded funds (ETFs). No wonder hundreds of ETFs have been launched thus far in 2007.

Reader Comments

Dollarwise Dan

December 14, 2007 5:33 PM

The mutual fund industry will get a big bite taken out of it because ETFs are a relatively new market, growing and in many ways offer direct competition and interesting, different asset class investment options.

I wouldn't, however, call it End of Days for the MFs because for people who want to dollar-cost-average into an investment with no broker/transaction fees, MF funds are a better bet. No brokerage fee when you add $100-a-month into a Vanguard index fund.

Both ETFs and MFs have pros and cons with regard to tax liability, potential volatility, management fees- the fine print has to be read on the prospectus of either option.

Worth mentioning that ETFs trade on the market value of the ETF; Mutual Funds have a NAV based on the underlying assets. And I'd to say that Mutual Funds are also, generally speaking, safer (I know that's a loaded word) but what I mean is that- They are long investments (at least now) while with an ETF you can get all kinds of casino-like action- Double-Short ETFs anyone?

So Mutual Funds- going to lose a share of their audience, but not going away.

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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