By Gavekal Capital Blog
At long last the fund rating company, Morningstar, has decided to put mutual funds and exchange traded funds (ETFs) on a level playing field when it comes to fund ratings and comparisons (read Morningstar's FAQ). Beginning on November 30, 2016, Morningstar did away with segregated categories for mutual funds and ETFs and merged both types of open-ended investment vehicles into all-encompassing categories. This change is rooted in migrating investor preferences as assets flow into ETFs at the expense of often-times poorer performing, higher cost, and tax-inefficient actively managed mutual funds. Indeed, according to the Investment Company Institute, ETF assets have grown more than seven-fold since 2006 while mutual fund assets have grown less than two-fold over the same period.
So, what does all this mean for financial advisors and why is it important? As fiduciaries, financial…