Publicly traded REITs, on the other hand, may finally enjoy some freedom of movement, he adds.

“Publicly traded REITs have been shown to have a relatively high correlation to the broader market,” Swaringen says. “De-linking financial services and real estate might over time create a more pure correlation or volatility for these REITs, more in line with private REITs — which tend to be less volatile.”

Mortgage REITs, companies that manage real estate debt rather than the equity properties themselves, will remain in the financials sector.

Yet REITs currently account for nearly 20 percent of the financial sector. A change in the classification radically changes the indexes underlying many financial ETFs.

The move, announced last year, has prompted response from asset managers. State Street Global Advisors, which manages the Financial Select SPDR ETF (XLF), the largest financial ETF, has launched a new Real Estate Select SPDR Fund (XLRE) in advance of the reclassification. When the financial sector Index is reconstituted, State Street will issue a special dividend to XLF shareholders comprised of shares of XLRE.

Other financial sector funds that use MSCI and S&P Dow Jones indices will sell off their REIT exposure after the reclassification.

The Guggenheim S&P 500 Equal Weight Financials ETF (RYF) will lose its REIT exposure after Aug. 31, said Guggenheim spokesman Ivy McLemore.

“As the underlying indexes our ETFs change, we correspondingly rebalance/reconstitute the funds’ holdings as necessary in pursuit of delivering on the investment objective to track the performance of the underlying index,” McLemore said responding to questions by email. “S&P’s changes to the indexes will be the catalyst for changes in the funds.”

The firm does not expect major changes to the Guggenheim S&P 500 Equal Weight Real Estate ETF (EWRE) as a result of the reclassification.

The Vanguard Financials ETF (VFH), which currently allocates nearly 30 percent of its assets to REITs, will also shed its REIT exposure when it rebalances after the classification, said company spokesman David Hoffman.