Launching a proprietary ETF can feel like a natural next step for a boutique wealth or asset management firm looking to grow. ETF launches are booming, yet many wealth management firms watch their new funds close within a few years of launch.

This guide details the most common mistakes asset managers make when launching an ETF, and how to avoid them.

What Wealth Managers Get Wrong About Launching an ETF

It’s easy to see why ETFs have a strong appeal. Total U.S. ETF assets under management grew to more than $11 trillion in 2025 and continue to climb. New product launches are at record highs, with approximately 1,000 new U.S. ETFs introduced in 2025.

But the failure rate is high. Hundreds of ETFs close every year. Roughly one in three ETFs launched in any given year closes within five years.

ETF economics vary by fee level and structure, but many issuers view $50-100 million in assets as the breakeven point, where a fund covers distribution costs, fees for exchange listing, data licensing, and legal and compliance. Whatever the breakeven point, only about 11 percent of active ETFs raised $100 million in their first year.

The lion’s share of net new inflows has been concentrated in just a handful of dominant firms—American Century, BlackRock, Capital Group, Dimensional, Fidelity, and J.P. Morgan—which accounted for roughly half of the approximately $475 billion in active ETF inflows in 2025.

ETF issuers that succeed share common traits. So do the ones that fail. Here are the questions you need to answer to ensure your launch doesn’t go wrong.

1. ETFs Fail for Lack of a Differentiated Story

The basic question gatekeepers will ask you is: Why should they allocate shelf space to you? This overall question can be apportioned into several issues:

Q: What is your ETF’s competitive advantage?

Gatekeepers are likely to reject funds that are only marginally different from current funds. You must be able to state your competitive advantage in one sentence that passes the “so what” test: not just what your fund does, but why no current product already does it well. The answer is about product differentiation, which could be in your methodology, asset class, investment design, index, or a combination of factors.

Q: What client problem does your fund solve?

Why would a client be better off allocating assets to your fund than the familiar name they already own? Does your ETF reduce risk in down markets better than most? Are returns more uncorrelated with the market and with less volatility? Does your fund provide a higher monthly income than other investments? Does it mitigate taxes more than most? And so on.

Q: How do you tell your story?

Many ETF pitches sound alike. “Our fund is ‘tax-efficient,’ has ‘low fees,’ is ‘uniquely innovative,’ or quantitatively ‘data-driven.’” Investors and advisors have heard these claims countless times. Successful ETF launches need a great story, of course, and your messaging must articulate who the fund is for, what problem it solves, what its edge is, and why it deserves attention.

2. Why ETFs Fail: No Idea of the Competitive Landscape

Asset managers often enter the ETF market believing their investment strategy is genuinely different. Sometimes it is. Often, the differentiation is less clear to investors. Before you launch, you need to conduct a competitive audit. Consider these questions:

Q: Is my fund in an asset category that is seeing inflows or outflows?

You might have more success if your fund is in an asset category that investors are buying. Over the last five years, the strongest ETF asset gatherers have been equity, core fixed income, and, more recently, active strategies. In 2025, US equity ETFs raised the most assets, about $923 billion, or 63% of total U.S. ETF inflows. Fixed-income ETFs gathered around $430 billion in 2025, led by aggregate and government bond funds. Tech ETFs were a top sector group in 2025, raising about $38 billion.

Think twice before launching an ETF in a category with large outflows. Over the past five years, the ETF categories with the largest outflows have been leveraged equity products, and energy, health care, and consumer sectors.

Q: Are active or passively managed ETFs more popular now?

Over the past five years, actively managed ETFs have been one of the fastest‑growing segments of the ETF market, with assets increasing more than tenfold to over $1 trillion by 2025. ETFs took in about one‑third of all 2025 U.S. ETF net inflows, and more than 80% of new ETF launches were active. Yet active ETFs still represent a minority of U.S. ETF assets. with an 11% share as of the end of 2025. Passively managed ETFs held the other 89%.

Q: What have been the top-selling ETF categories?

Top-selling categories over the past several years have included core portfolio building blocks, such as core market index ETFs; growth strategies like momentum equity and long-short ETFs; income solutions such as option income and dividend‑focused equity ETFs; and thematic approaches, represented by cryptocurrency, leveraged, inverse, target-date, single‑stock, and inflation-protected ETFs, among others.

Q: How can boutique managers stand out when the top firms control the market?

According to SS&C Technologies, boutique managers must focus on understanding their strategic value, holding to what makes them unique, and showing consistent messaging.

3. Why ETFs Don’t Grow: No Distribution Strategy

Many firms build their ETF first and think about distribution second. According to Cerulli Associates, 71 percent of ETF issuers believe it is difficult to secure shelf space for active ETFs on broker‑dealer platforms.

Q: What are the major distribution platforms for ETFs, and what are the key considerations issuers need to understand for each?

ETF issuers typically focus on five advisor sales platforms: RIAs, wirehouses, independent broker‑dealers, banks/insurance broker‑dealers, and TAMPs/model marketplaces. Consider modeling your ETF to match the needs of the marketplace you want to be in.

Q: Does my fund need to be on all major fund platforms?

You don’t need to be everywhere on day one. A focused strategy that targets the platform(s) where your ideal investors already are may be the best approach.

Q: What are platforms’ basic due diligence requirements?

Distribution platforms will screen your firm’s brand, your product’s investment strategy and process, compliance history, and average daily trading volume before they consider offering you shelf space. Other considerations include:  

• Minimum asset level of typically $50-100 million assets under management
• Six to 12 months of performance, and in many cases up to three years
• Reasonable expense ratios versus category peers
• Small bid‑ask spreads of a few basis points
• Evidence of growing third‑party usage

4. No Idea of Costs That Influence Profitability

The excitement around launching a proprietary ETF may overshadow the financial facts of what things cost.

Q: What are the legal fees in launching an ETF?

Many boutique issuers reduce upfront costs by launching within an existing series trust or white‑label platform rather than creating a new standalone trust. Most industry estimates indicate that legal start‑up fees to launch an ETF typically run about $30,000 to $70,000. But ongoing operating costs are more, and may be about $250,000 to $300,000 per year for administration, legal, compliance, and exchange listing fees. Note that these are estimates. Actual costs will vary based on fund size, complexity, and service providers chosen.

Q: What are the ongoing costs of maintaining an ETF?

Beyond the launch, firms must be prepared to incur, among other costs, annual audit fees of approximately  $15,000 to $40,000; prospectus updates and printing of $10,000 to $30,000; marketing material compliance review of $10,000 to $50,000; and exchange listing fees of roughly $5,000 to $15,000.

Q: How do ETF issuers compensate seed capital providers?

Seed‑capital providers typically get compensated by receiving institutional share classes or fee discounts. Some negotiate revenue‑sharing on the fund’s management fee once assets reach certain breakpoints, or priority liquidity and exit terms for their seed position. 

Q: Under what circumstances should firms not launch an ETF?

An ETF launch may not be for all. If you are not prepared to commit the resources to build it, your better path may be a separately managed account strategy, a model portfolio, or a private fund structure.

5. ETF Launches Fail Because They Lack a Marketing Strategy

Some firms launch an ETF primarily to keep assets in-house or diversify their product line. But marketing is often an afterthought.

Q: Why do I need to market my ETF if performance speaks for itself?

Marketing is more than a fact sheet, a press release, and talk of performance. Think of a launch as a long-term campaign. You need to educate gatekeepers and investors, show how and why you are different, and demonstrate how your strategy matches investors’ long-term financial goals.

Q: What is digital marketing, and how can it help?

Digital marketing is the practice of reaching qualified investors with messaging on your website, in social media, and through email newsletters that look to compel action.

Where do your prospective ETF investors spend time online? For a thematic fund, like a gold or crypto ETF, consider engaging on LinkedIn and other forums where enthusiasts gather to discuss the topics they care about most. Among other data points, digital intelligence can tell you who reads and downloads your content, for how long, when they leave, if they share with others, and if they come back for more.

Q: Is social media just noise, or can it actually move the needle for my ETF?

Think of social media as an additional way to get discovered. Many gatekeepers and investors actively use LinkedIn and X to identify and understand ETFs. Regular posting is critical.

The Ultimate Quick ETF Launch Checklist

Use this ten-point checklist to plan for an impactful proprietary ETF launch.

1. Prove your business case

Define breakeven AUM, profitability, and how your ETF supports your broader firm strategy.

2. Clarify differentiation

Write a one‑sentence answer to “What does this ETF do that existing funds don’t?”

3. Validate investor demand

Confirm the category has positive inflows.

4. Audit the competition

Know your competitors, their fees, performance, liquidity, and distribution advantages.

5. Choose the right legal structure

Decide between a series trust and a standalone trust based on costs and control.

6. Model all-in costs

Estimate legal, audit, listing, index, seed, and marketing expenses for at least three years.

7. Secure distribution

Identify priority platforms and their due diligence hurdles.

8. Build a long-term marketing plan

Budget for ongoing content, campaigns, and public relations; assign owners and timelines.

9. Align operations and trading

Ensure portfolio management and operations are ready for daily ETF maintenance.

10. Set guardrails

Create timelines, AUM milestones, and resource commitments.

The Final Cut: What Managers Get Wrong About Launching ETFs

Many asset managers treat ETF launches as one-time events. They misjudge demand, underestimate costs, skip competitive analysis, and delay distribution and marketing planning.

Winning managers, however, think long term, choose the right legal structure, pick the right distribution platform, and launch with a great story backed by timely, informative content and digital distribution.

Schedule a complimentary strategy session with Dan Sondhelm, CEO of Sondhelm Partners, to learn how to create an effective ETF marketing strategy.

Frank Serebrin is the Content Marketing Director for Sondhelm Partners. He leads strategic and creative content and marketing services for our asset management and wealth management clients.