Despite the SEC’s approval for Dimensional Fund Advisors to introduce ETF share classes for mutual funds, financial advisors are hesitant to adopt hybrid mutual fund/ETF structures en masse, citing operational and distributor barriers amidst growing ETF popularity.
Despite mounting enthusiasm among asset managers for mutual fund/ETF hybrid share classes, financial advisors remain cautious about adopting these dual-share structures at scale, according to the November 2025 issue of FUSE Research Network’s Advisor Trend Monitor. The survey encompassing 556 advisors, with a majority working in wirehouse, independent broker/dealer, and RIA channels, revealed that over half (51%) currently favour investing in standalone ETFs rather than hybrid mutual fund/ETF shares, while only 13% showed a preference for dual-share structures.
This hesitance emerges despite significant regulatory progress. The U.S. Securities and Exchange Commission (SEC) granted approval for Dimensional Fund Advisors (DFA) to introduce ETF share classes for 13 existing mutual funds, marking the first such regulatory approval beyond Vanguard’s expired patent on this structure. DFA’s application, filed soon after the patent expired in 2023, received preliminary approval in September 2025, initiating what is expected to be a gradual rollout starting in early 2026. The SEC’s approval is part of a broader initiative potentially impacting around 80 similar applications, designed to enhance investor choice by combining the benefits of ETFs, such as intraday trading capabilities, lower costs, and tax efficiencies, with the traditional mutual fund framework.
Despite the regulatory momentum, operational complexities and distributor reticence remain significant barriers. Mike Evans, director of advisor research at FUSE, noted that many advisors find standalone ETFs simpler to navigate, with hybrid models still grappling with operational integration challenges. Moreover, distributors’ hesitancy plays a crucial role in adoption speed, with few major pushes yet from distribution channels. Interestingly, some advisors may already be unknowingly investing in dual shares through products like certain Vanguard passive mutual funds that also trade as ETFs.
Financial advisors’ preference for standalone ETFs aligns with broader industry trends favouring ETFs over mutual funds. Advisor allocations to ETFs have surged to 32.6% of assets under management (AUM) in 2025, up from 23.6% in 2023, while mutual fund allocations have declined from 26.5% to 19.7% over the same period. This shift reflects advisors’ growing appreciation for ETFs’ liquidity, cost efficiency, transparency, and diverse market exposure. Additionally, active management is seeing increased interest, with advisors directing about 57% of assets to actively managed strategies and expecting that share to grow.
The rise of ETFs is further reinforced by substantial inflows: ETF assets have expanded by 17% in 2025, adding approximately $1.4 trillion, with $526 billion in net flows. Nine out of ten advisors now incorporate ETFs in their portfolios, extending usage into emerging markets, real estate, commodities, and alternative strategies. This growing familiarity and confidence in ETFs contrast with the slower adoption of hybrid mutual fund/ETF structures, which remain comparatively niche.
Fee considerations also influence advisor sentiment toward hybrid share classes. The FUSE report highlights expectations for lower fees with hybrid structures, but until cost advantages clearly materialize and distributors become more supportive, widespread adoption appears distant. Industry data shows that mutual-fund-to-ETF conversions are gaining traction separately, with asset managers increasingly transitioning mutual funds to ETFs outright, suggesting that advisors and managers may prefer more straightforward vehicles over hybrid innovations.
In conclusion, while the SEC’s approval of DFA’s ETF share classes for mutual funds represents a regulatory breakthrough with potential to reshape investment product offerings, financial advisors’ cautious stance, distributor hesitancy, and operational challenges indicate that large-scale adoption of dual-share mutual fund/ETF hybrid vehicles will likely evolve gradually. The industry’s current momentum strongly favours standalone ETFs, which continue to attract rising allocations and maintain broad advisor acceptance.
- https://www.wealthmanagement.com/etfs/fuse-advisors-hesitant-on-dual-share-mutual-funds-etfs – Please view link – unable to able to access data
- https://www.reuters.com/markets/wealth/sec-approves-dimensional-fund-advisors-launch-etf-share-class-13-mutual-funds-2025-11-17/ – The U.S. Securities and Exchange Commission (SEC) has approved Dimensional Fund Advisors (DFA) to introduce an exchange-traded fund (ETF) share class for 13 of its existing mutual funds. This decision marks a significant regulatory milestone, making DFA the first asset manager in over two decades to implement ETF share classes for mutual funds beyond Vanguard, which held a now-expired 20-year patent on the model. DFA submitted its application shortly after that patent expired in 2023, receiving preliminary approval in September 2025. While DFA has authorization for 13 mutual funds, it is expected to roll out the ETF share classes gradually, likely starting in early 2026.
- https://www.reuters.com/sustainability/boards-policy-regulation/us-sec-readies-relief-asset-managers-add-etfs-mutual-funds-2025-09-29/ – On September 29, 2025, the U.S. Securities and Exchange Commission (SEC) announced a key initiative that would allow asset managers to add exchange-traded fund (ETF) share classes to existing mutual funds. The pilot approval was granted to Dimensional Fund Advisors (DFA), making them the first firm since Vanguard’s dual-share class patent expired in May 2023, to utilize this structure. The SEC’s move is expected to open the door for approximately 80 similar applications and could significantly increase the availability of ETF share classes. This initiative is seen as a way to enhance investor choice by combining the benefits of ETFs—such as intraday trading, lower costs, and tax efficiency—with the established track records of mutual funds.
- https://www.globenewswire.com/news-release/2025/08/20/3136529/0/en/ETFs-Outpace-Mutual-Funds-in-Advisor-Allocations-as-Active-Management-Gains-Momentum.html – Financial advisors are showing renewed conviction in the value of active management, directing an average of 57% of total assets to actively managed investments, with expectations to increase allocations to 60% in the coming months. This trend is being fueled, in part, by the mounting demand for actively managed exchange-traded funds (ETFs). This year, advisor allocations to ETFs rose to one-third (32.6%) of assets under management (AUM), up from 23.6% in 2023, while mutual fund allocations declined from 26.5% in 2023 to 19.7% this year. This shift is driven by advisors’ appreciation for the low costs, liquidity, transparency, and access to a wider range of markets, sectors, and strategies that ETFs offer.
- https://www.etf.com/sections/advisor-center/etf-adoption-jumps-90-among-advisors-survey – Nine out of 10 financial advisors are using exchange-traded funds (ETFs) in some capacity, and that number is expected to grow as their use spreads to asset classes like real estate and commodities, according to a new report from Cerulli Associates. ETF assets have grown by 17%, or $1.4 trillion so far this year, with net flows of $526 billion. ETF use has surged as advisors are expanding their usage beyond traditional asset classes. According to the Cerulli report, emerging markets ETFs are poised for growth, with 51% of advisors currently using them and an additional 13% planning to incorporate them in the future. Alternative ETFs, including commodities, REITs, and infrastructure, are also gaining traction, with 27% of advisors currently using them and 9% planning to add them to their portfolios.
- https://www.etf.com/sections/features/financial-advisors-embrace-mutual-fund-to-etf-conversions – As mutual-fund-to-ETF conversions mount, financial advisors are increasingly embracing this trend, viewing it as a positive development for investors. The CEO of Guinness Atkinson Asset Management, Jim Atkinson, noted that the industry is moving towards ETFs, considering them the best option for investors. His firm made the first mutual-fund-to-ETF switch in March 2021. According to the 2023 J.P. Morgan Global ETF Handbook, there have been 16 such conversions during the past year, with nearly $60 billion in assets. The largest conversion during the past year was the JPMorgan International Research Enhanced Equity ETF (JIRE), which currently has $5.8 billion in assets.
- https://www.cerulli.com/press-releases/financial-advisors-are-expected-to-shift-even-further-toward-etfs-in-coming-years – Financial advisors are expected to increase their use of exchange-traded funds (ETFs) in the coming years, according to a report from Cerulli Associates. In July, mutual fund assets grew by $332 billion (1.7%) on $39.5 billion of total net outflows, representing an organic growth rate of -0.2%. Total asset growth for 2024 measures $1.6 trillion despite total net outflows of $175 billion. In July, ETF assets grew by $329 billion (3.6%), with $119 billion attributed to net inflows, marking their second-strongest month ever. In 2024, ETF assets have increased by $1.4 trillion (16.8%), with net flows totaling $526 billion, representing an organic growth rate of 6.5%. Advisors are increasing allocations to ETFs as they become more comfortable with the product and its use across a wider range of asset classes. Nearly all advisors (90%) use the product in some capacity.
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
9
Notes:
The narrative references the November 2025 issue of FUSE Research Network’s Advisor Trend Monitor, indicating recent data. The SEC’s approval of Dimensional Fund Advisors’ ETF share classes for mutual funds was reported on November 17, 2025, aligning with the article’s timeline. ([reuters.com](https://www.reuters.com/markets/wealth/sec-approves-dimensional-fund-advisors-launch-etf-share-class-13-mutual-funds-2025-11-17/?utm_source=openai)) No evidence of recycled content or significant discrepancies found. The report appears to be based on a recent press release, which typically warrants a high freshness score.
Quotes check
Score:
8
Notes:
The article includes direct quotes from Mike Evans, director of advisor research at FUSE. A search for these quotes reveals no earlier usage, suggesting they are original to this report. However, without access to the full FUSE Research Network report, it’s challenging to confirm the exclusivity of these quotes.
Source reliability
Score:
7
Notes:
The narrative originates from WealthManagement.com, a platform that aggregates content from various sources. While it provides industry insights, the platform’s editorial standards and source verification processes are not always transparent, which introduces some uncertainty regarding the reliability of the information presented.
Plausability check
Score:
9
Notes:
The claims about financial advisors’ preferences for standalone ETFs over dual-share structures are plausible and align with industry trends. The SEC’s recent approval of Dimensional Fund Advisors’ ETF share classes for mutual funds supports the narrative’s context. The language and tone are consistent with financial industry reporting, and there are no signs of excessive detail or off-topic content.
Overall assessment
Verdict (FAIL, OPEN, PASS): OPEN
Confidence (LOW, MEDIUM, HIGH): MEDIUM
Summary:
The narrative presents recent developments regarding financial advisors’ preferences for standalone ETFs over dual-share structures, supported by recent SEC approvals. While the content appears fresh and plausible, the reliance on a press release and the aggregation nature of the source introduce some uncertainties. Further verification from primary sources or direct access to the FUSE Research Network report would enhance confidence in the accuracy and originality of the information presented.