Vanguard is increasingly popular among investment advisers, outranking iShares for the first time to become the most popular ETF provider in terms of adviser loyalty, a study from Cambridge, Mass.-based Cogent Research showed.

According to the 2010 Advisor Brandscape report compiled by the market research firm, advisers who use Vanguard ETFs are more committed to the brand than those using iShares products, John Meunier, a Cogent principal, told IndexUniverse.com.

“Vanguard is the only top-five ETF provider to grow its market share among ETF producers in the past year,” Meunier said. Cogent surveyed 1,560 investment advisers.

While iShares remains by far the biggest ETF sponsor, Cogent’s findings about adviser loyalty are corroborated by Vanguard’s gains in market share. In the last year, use of Vanguard products rose to 42 percent of advisers from 37 percent in the prior year, while use of iShares’ ETFs dropped 3 percentage points to 87 percent in the period. Other evidence suggests Vanguard is slowly chipping away at iShares.

The Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO), for example, looks to be on track to surpass the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM) in assets by the end of the year. EEM had almost $40 billion at the end of August, compared with a bit over $30 billion for VWO. In April, EEM had $36 billion in net assets compared with $24 billion for VWO, according to data compiled by IndexUniverse.com.

“Obviously, in terms of penetration, they have a long way to go to catch iShares, but right now the momentum is clearly with Vanguard,” Meunier said.

For its part, iShares doesn’t seem to be worried about its place in the market.

“The 2010 Cogent Report states that nearly nine in 10 advisers use iShares, and iShares penetration is more than double Vanguard’s penetration,” Noel Archard, head of U.S. iShares product at BlackRock, told IndexUniverse.com.

“iShares has over $180 billion in advisor assets, and growing. This is a testament that advisers continue to see iShares as the committed leader in the ETF space,” Archard added.

The Details

Cogent looked at various indicators including market penetration, advisers’ level of commitment as well as how much they are allocating to different ETFs. In the last year, the average amount of assets that Vanguard captured among advisers doubled to roughly match the $5.7 million in average assets under management iShares snags per adviser.

iShares still outperforms Vanguard in the range of products it offers, Meunier said, but Vanguard outperformed its competitor in just about every other category Cogent takes into account, especially in “aspects of service and client experience.”

“Price was not one of the top 10 leading drivers of adviser loyalty, although it’s important,” Meunier added, referring to Vanguard’s focus on low-cost ETFs.

State Street and Pimco ranked in third and fourth place among advisers, respectively.