Future ETF Industry Developments

The ETF industry continues to grow and innovate. In this article, we try to keep up with future potential developments in the ETF industry (at least the ones we can anticipate).

Non-transparent ETFs

One advantage to the ETF structure has always been the high degree of transparency. You can usually visit the ETF's website at any time and see a list of assets that they are holding. Most ETFs update the holdings information on their website on a daily basis. Actively managed ETFs are required to disclose their holdings on a daily basis. Some sponsors of actively managed ETFs have proposed the concept of a "non-transparent" ETF, an ETF that would not be required to display its holdings, or at least display them as often as current ETFs. The Securities and Exchange Commission has not ruled on whether they will accept non-transparent ETFs.

Department of Labor Fiduciary Rule Change

The Labor Department's new "fiduciary rules" have been delayed several times but are now currently scheduled to take effect July 1, 2019. The standards set by the Labor Department require that the financial advisers and brokers who handle individual retirement and 401(k) accounts must act in the best interest of their clients, rather than recommending investments that although clients may be able to afford, may not be the cheapest or best options. This change is believed to further stimulate the ETF industry because of the low cost of many passively managed ETFs compared to actively managed mutual funds.

This change may eventually have a dramatic effect on 401ks and other retirement accounts. Corporate 401k and other retirement accounts currently do not have make heavy use of ETFs, but continue to mostly use actively managed mutual funds. In the future, it will be hard for these corporate retirement accounts to continue to rely mostly on actively managed mutual funds with high fees, when an investor can buy an index ETF with really low fees.

Bitcoin ETFs

The SEC is currently considering whether to approve new ETFs that would track the value of bitcoin, the crypto currency.


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