The wealth and asset management industry is undergoing a fundamental transformation. Shifting investor demographics, increased demand for financial democratization, and a growing appetite for broader asset access are reshaping how investment products are structured, distributed, and operated. At the center of this evolution is the continued rise of exchange-traded funds (ETFs) and a regulatory shift that could redefine how funds are offered and managed.

ETFs and the Next Phase of Growth

ETFs have emerged as one of the most influential innovations in modern investing. In the United States alone, ETF assets under management exceed $10 trillion, with projections suggesting that number could double by the end of the decade. This growth reflects investor demand for liquidity, transparency, tax efficiency, and lower costs hallmarks that have made ETFs increasingly attractive relative to traditional mutual funds.

As ETF adoption accelerates, asset managers are seeking new ways to deliver these benefits more broadly. One of the most significant developments is the growing interest in dual-share-class fund structures, which allow a single portfolio to offer both mutual fund and ETF share classes. More than 80 traditional asset managers have already applied to the Securities and Exchange Commission for exemptive relief to pursue this model.

If approved at scale, dual-share-class funds could offer enhanced flexibility, improved tax efficiency, and lower operational costs, unlocking meaningful value for both asset managers and investors.

The Operational Challenge Beneath the Opportunity

While regulatory momentum is building, operational reality presents a significant hurdle.

Today, ETFs and mutual funds are typically supported by separate, siloed systems, each with distinct workflows, teams, and processing rules. Converting a mutual fund investment into an ETF share class often requires manual, bilateral coordination between broker-dealers and fund managers. These conversions can take up to five days, introducing operational friction, increased market exposure, higher costs, and a suboptimal investor experience.

Investors are generally shielded from the complexities of financial infrastructure. However, without a fit-for-purpose solution to support seamless share-class conversions, these inefficiencies can translate into real financial, operational, and reputational risk.

History shows that ETF innovation has always depended on parallel advances in market infrastructure. As dual-share-class models move closer to regulatory approval, the industry must once again modernize the systems that support product evolution.

Why Automation and Standardization Matter

The challenge is not merely technological, it is structural.

Most firms operate ETF and mutual fund platforms independently, using different processing methods and trade structures. This fragmentation makes it difficult to support a unified product framework like a dual-share-class fund. Asset managers are increasingly recognizing the need for a comprehensive, standardized operating model that supports both fund types within a single, integrated framework.

Automation and standardization offer a path forward. By reducing manual processes and harmonizing workflows, firms can improve scalability, shorten conversion timelines, reduce risk, and deliver a smoother investor experience.

Industry Momentum Toward a Shared Solution

Industry groups and infrastructure providers are already taking steps in this direction. A recent paper from the Investment Company Institute highlights the importance of operational efficiency, automation, and standardized connectivity to support ETF share-class functionality. The paper underscores that while ETFs and mutual funds differ structurally, their convergence demands an industry-defined solution rather than fragmented, firm-specific fixes.

In response, DTCC in collaboration with asset managers, broker-dealers, and ETF agents,is enhancing its Fund/SERV platform to support automated mutual fund-to-ETF share-class exchanges. This initiative builds on decades of industry collaboration and aims to reduce friction, improve efficiency, and support scalable growth as new fund structures emerge.

Looking Ahead

The evolution of ETFs and the introduction of dual-share-class fund models represent more than a regulatory milestone; they signal a broader convergence across investment products, infrastructure, and investor expectations.

To fully realize this opportunity, the industry must continue to work collectively to design and implement robust, holistic solutions that support innovation without compromising efficiency or investor trust. The growth of ETFs has always been driven by collaboration between regulators, asset managers, and infrastructure providers.

The industry has navigated transformations like this before and once again, it stands at the threshold of unlocking the next generation of investment opportunities.

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