In July, Dimensional applied for exemptive relief from the US Securities and Exchange Commission (SEC) to be able to offer ETF share classes of our mutual funds. We believe that the ability to offer both mutual fund and ETF share classes in certain funds could enable more investor choice and provide lower transaction costs, tax efficiencies, and benefits of scale to all shareholders.1
Since filing our application, we’ve received a significant amount of positive feedback from financial professionals. This has reinforced our conviction that the ability to use the ETF share class structure would benefit everyday investors across the country.
We invited a broad cross-section of financial professionals, including independent advisors, broker-dealers, bank trust representatives, retirement plan professionals, and large institutional investors, to share their perspectives. Close to 500 financial professionals from 40 states—who collectively manage $3 trillion in assets for 5.5 million investors—expressed their clear support. Each affirmed that the availability of ETF share classes would benefit investors.
We also asked them to share, in their own words, why this would be good for their clients. More than 300 financial professionals provided written responses. While their answers covered a range of potential benefits they identified for investors, most of the advisors focused on three general areas:
1. Lower transaction costs
“Being able to lower trading costs for our clients would be a huge benefit and make rebalancing much easier and efficient.”
“Over time, even minor savings can compound, significantly impacting returns.”
2. Increased tax efficiency
“This would benefit our clients tremendously, providing more tax efficiency and helping them to achieve their long-term goals.”
“Optimized tax strategies allow clients to retain more of their returns, which can greatly enhance their overall financial well-being.”
3. Greater investor choice
“First and foremost, it gives my clients more choices and investment options.”
“This provides us more choice to offer investment products to better serve our clients.”
When we first filed our application, we were encouraged by the strong and enthusiastic response from financial professionals across the industry. In the months since, we’ve continued to receive positive feedback and support at industry meetings, conferences, and events. And other investment managers—most recently Fidelity—have filed similar applications for exemptive relief.
ETF share classes already bring benefits to many investors. In fact, more than $2 trillion in assets are currently invested in ETF share classes in the US, despite being available only through a single fund group that obtained relief from the SEC decades ago. Other markets outside the US also recognize the benefits of ETF share classes, including in Europe and Australia.
Advances in fund regulation over the past several decades have transformed the investment opportunities available to US investors, resulting in lower costs and increased choice for investors. The SEC has an opportunity to build on these positive developments by granting exemptive relief to more fund groups, giving such funds the ability to offer ETF share classes.
Financial professionals believe that broadening ETF share class access would benefit investors. We will continue to advocate for that outcome.
FOOTNOTES
- If the SEC grants our requested exemptive relief, we would work closely with Dimensional’s mutual fund board of directors to evaluate, on a fund-by-fund basis, which mutual funds are appropriate candidates to offer an ETF share class.
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