Rules that took effect in 2018 requiring brokers to disclose to their customers how much they’re charging for municipal-bond trades has brought greater scrutiny by investment advisors to trading costs, he said.
Continued adoption of model portfolios by investment advisors and their clients will also contribute to muni ETF growth, according to Citigroup. Model portfolios, purchased from investment platforms, package ETFs and other funds into customized strategies that can be tweaked based on risk appetite and market moves.
Model portfolio managers like FMR LLC’s Strategic Advisers, Wealthfront Advisors and Creative Planning are among the biggest holders of Vanguard’s and BlackRock’s muni ETFs, according to securities filings.
Advisors like the automated, off-the-shelf products, which allow them to focus more on client relationships even as they grow their business, Pettit said.
“When model portfolios get their teeth into an ETF or a group of ETFs, you start to see this stable, almost constant, drip of money coming into these products,” Pettit said in an interview. “And it’s really hard to unseat that.”
This article was provided by Bloomberg News.