Cerulli Research highlights how the growing wealth of retail investors is pushing advisors to prioritize tax efficiency, with ETFs becoming an increasingly attractive structure. ETFs offer significant tax advantages, such as low turnover and minimized capital gains distributions, making them particularly appealing in today’s uncertain economic climate. 

As a result, Cerulli expects more separately managed account (SMA) assets to shift into ETFs, driven by both tax benefits and operational efficiencies. High net worth advisors are also focusing more heavily on tax planning, with the percentage offering tax guidance rising sharply in recent years. 

Despite the $2.7 trillion currently held in SMAs, advisors are steadily increasing their ETF allocations, especially at larger practices. However, barriers like the high cost of launching ETFs mean wealth management firms will need scale — and may increasingly turn to white-label providers for help — to fully capitalize on this shift.

Finsum: Separately managed accounts could definitely see a spike in popularity in the coming years given technological ease.