The End Of Mutual Funds.

I saw this presentation when I was at the Index Universe ETF conference a few weeks ago:

"ETFs are likely to displace mutual funds within about 15 years, Ric Edelman, the top-rated financial advisor, told attendees at IndexUniverse’s 6^th annual Inside ETFs conference on {February 13, 2013}, one of numerous views expressed at the conference that the ETF is likely to be at the very center of the asset management business.

'The mutual fund made sense when it came out in 1924,' Edelman said during a 'fireside chat' with IndexUniverse President of ETF Analytics Matt Hougan. 'That was a pencil and paper business model, and it doesn’t make sense in a technologically driven world.'

Edelman’s views, founded on ETF attributes of low cost, transparency and tax efficiency, were consistent with the general thrust of commentary at the three-day Inside ETFs conference, held at the Westin Diplomat in Hollywood, Fla., from Sunday, Feb. 10 to Tuesday, Feb. 12.......

.......Artience Capital's Kim Nordmo said Sunday she expects to see ETFs coming to 401(k) plans. “There are 72 million investors that don’t have ETFs available” to their retirement programs. Nordmo said she expects more 401(k) administrators to realize the fiduciary responsibility they have to offer those to participants....

I'm not willing to say that all mutual funds will be gone in 10 years.  I do know ETFs are making significant inroads into the sandbox that mutual funds had to themselves for many years.  Mutual funds simply cannot compete on costs.  The average mutual fund costs investors in my view somewhere between 2-3% each year, although this gentleman says the costs are higher, possibly as much as over 4%!   Mutual funds also cannot compete on transaction speed as all orders have to be processed at the end of the day.  

Mutual funds lost a major battle last year when they were required to tell 401k shareholders what the management costs were to them in an easy to read form that investors received last summer.  Trust me that has opened a few eyes amongst those that hold these in their retirement accounts.  

Link:  Index Universe.com: Edelman: ETFs To Spell End Of Mutual Funds