While the ten most popular ETFs in 2017 are market cap-weighted equity and fixed income products from iShares and Vanguard, 59% of respondents to a recent Schwab study expect to increase investments in "smart beta", or non-market-cap weighted products in the next year. This compares favorably to just 2% that plan to decrease exposure in this ETF class. Though there are some differences of opinion on what is and is not considered a smart beta ETF, what is clear is investors have many more choices to consider than before.

Smart beta products fall between market-cap-weighted index-based ETFs such as iShares Core S&P 500 ETF (IVV 252 Overweight) and Vanguard FTSE Developed Markets ETF (VEA 43 Overweight), and actively managed mutual funds such as American Funds Washington Mutual Fund Investors Fund (AWSHX 43 ****) and Fidelity Magellan (FMAGX 99 ****).

Schwab's online study of approximately 1,300 ETF investors with more than $25,000 of investible assets was conducted by Koski Research in June 2017. In the last three years, 63% of the respondents reported that they have reduced active exposures and replaced with smart-beta exposures. Meanwhile, 39% say smart beta ETFs are a replacement to market-cap-weighted ETFs.

To CFRA, a smart beta ETF tracks a rules-based index constructed based on attributes other than price. Within this large bucket of ETFs, investors will find factor ETFs iShares Edge MSCI USA Quality Factor ETF (QUAL 77 Overweight) and iShares Edge MSCI USA Momentum Factor ETF (MTUM 94 Overweight), which are constructed based on certain attributes that have delivered strong returns relative to the broader market over time.

There's nothing new about factors, as academics have uncovered their power as drivers of portfolio returns for more than 50 years," explained Andrew Ang, head of factor investing strategies for BlackRock. "But the ETF wrapper, as a technology, has democratized factor investing. ETFs make factors easy, cost effective and accessible to everyone."

Price does indeed play a role in the current and future adoption of such products. According to a recent report from Morningstar, which uses the term "strategic beta" to group non-market-cap weighted ETFs together, costs for these ETFs have been coming down. Indeed, 25% of the U.S. strategic beta products decreased their fees in the one year period ended June 2017. Meanwhile, on an asset weighted basis, strategic beta equity products charged just a 30% premium fee (0.26%) relative to non-strategic equity products (0.20%).

For example, Vanguard Dividend Appreciation Index Fund; ETF (VIG 94 Overweight), one of the largest strategic beta ETFs highlighted in Morningstar's report, charges 8 basis points, a slight premium to the 5 basis points it costs to purchase Vanguard 500 Index Fund; ETF (VOO 230 Overweight).

However, VIG's fee is significantly lower than the cost to buy actively managed equity income mutual funds such as T Rowe Price Equity Income Fund (PRFDX 34 ***) (66 basis point cost) and Putnam Equity Income Fund (PEYAX 23 ***) (97 basis points).

While MTUM, QUAL and VIG have long histories as live products, Morningstar noted there were 233 strategic beta ETFs launched between the beginning of 2015 and June 2017. Despite their short performance records, CFRA ranks many of them based on a combination of holdings analysis and ETF attributes, such as expense ratio and bid/ask spread.

Goldman Sachs ActiveBeta US Large Cap Equity ETF (GSLC 50 Overweight) is one example, focused on low volatility, momentum, quality and value factors. The ETF launched two years ago and yet has successfully gathered $2.4 billion in assets. CFRA thinks the stocks inside are appealing from a valuation and risk perspective, while the 9 basis point expense ratio and a bullish technical indicator are positive attributes.

Despite its late entry into the ETF market, Goldman Sachs is the 10th biggest strategic beta provider in the Morningstar US league table with $4.4 billion; Goldman has a suite of international products following the ActiveBeta approach and has expanded its universe with fixed income ETFs. However Goldman remains far behind iShares and Vanguard with $240 billion and $143 billion in strategic beta ETFs at the mid-year point.

Other large players in this space include PowerShares and WisdomTree with $42 billion each. While they have many long-tenured products, including PowerShares S&P 500 Low Volatility (SPLV 46 Overweight) and WidsomTree US LargeCap Dividend Fund (DLN 86 Overweight). Recent additions to the ETF families ranked by CFRA include PowerShares Russell 1000 Low Beta Equal Weight Portfolio (USLB 30 Marketweight) and WisdomTree Emerging Markets Dividend (DVEM 33 Marketweight).

With $24 billion in strategic beta ETFs, including Schwab Fundamental US Large Company Index (FNDX 35 Overweight), Schwab is also benefiting from the trends that were found in its survey. However while 52% of its respondents indicated an intermediate understanding of ETFs, we hope they take a look inside products under consideration. For example, FNDX has a 13% weighting in energy stocks, while GSLC has just 3% in the sector.

CFRA reports on these ETFs and mutual funds can be found on this platform.