The ETF industry has broadened and matured—which means planning with ETFs will become more difficult and challenging.

Addressing the 2017 Inside ETFs conference in Ft. Lauderdale, Fla. on Monday, Inside ETFs CEO Matt Hougan argued that advisors and investors would no longer be satisfied with portfolio allocations focused on minimizing investment costs while offering broad market exposure.

“For the past 10 years, if you were an advisor or an investor, you had this enormous tailwind pushing you along just for using ETFs,” Hougan said. “Now everyone has caught up. ETFs are the No. 1 most recommended product by advisors and being an ETF advisor is no longer enough.”

To continue the ETF industry's impressive growth, advisors will have to think big, said Hougan and ETF.com CEO Dave Nadig in a presentation titled "Timing is Everything."

ETFs have become so common, said Nadig, that they account for 30 percent of the daily trading value on U.S. exchanges, and traditional, active asset managers are launching their own ETFs.

“We’ve seen this unbelievable entry from everybody in the asset management industry,” said Nadig. “They’re here because the active management story hasn’t really been working.”

Nadig said that wealth managers using ETFs are going to have to start thinking like institutional investors and fully embrace smart beta and other more differentiated investing tools.

“The first big smart beta ETFs weren’t targeted at my mom, or at you, but they were targeted at the Arizona state retirement system,” Nadig says. “When you see these smart beta products come to market and instantly get a lot of traction, it’s because they’re addressing an institutional demand.”

Asset managers have added value in the form of factor-weighted strategies as a response to fee compression in the industry, noted Nadig, and in response individual investors and wealth managers are looking more closely at smart beta.

Yet Nadig also noted that net inflows into smart beta products started to trail off in 2016 after strong growth in 2014 and 2015. In the past three years, most of the flows into smart beta products have followed the lowest-cost products from large providers, said Nadig, with the most popular funds generally coming from Vanguard and BlackRock.

“The truth is that the move towards low-cost beta products is even affecting what’s going on in smart beta,” Nadig said. “If you look at what’s happening to average fees inside smart beta products, they’re also coming down.”

Yet institutions are sophisticated investors using smart beta as long-term portfolio core products or balancing tools, also held over the long term.

Individual investors, however, struggle to use smart beta—smart beta investors’ performance tends to trail their benchmark indexes due to their behaviors. Even within smart beta, investors have a natural urge to buy products when they’re highly valued, and to sell products when they’re at a bottom.

“People are just not very good at figuring out how to use this,” Hougans said. “They’re missing because of all the stupid things they do. This means that you’re still really valuable as advisors, you keep them from making these dumb mistakes.”

Moving forward, both men predicted more active products coming to market, and more ETF launches aimed at millennial investors.

“There are already 168 active ETFs out there, and this number will double and triple in the years to come,” Hougan said. “The top-performing active funds crush the market, but the majority of them underperform.”

Similarly, environmental, social and governance-oriented ETFs are already on the market.

These initial products, for the most part, were launched in response to institutional investment mandates, said Nadig, but more will come because of the influence of millennial investors.

“It’s easy to dismiss this as the flavor of the month, but that’s not really true,” Nadig said.

Hougan said that the ETF industry will likely set another record for flows, noting that 2016 was a historic year for exchange-traded products.

“A record $284 billion flowed into ETFs in 2016,” Hougan said. “That was 20 percent more than had happened in any previous year. Half a trillion dollars moved out of mutual funds and into ETFs in one year alone.”