Exchange-traded funds, which already have a foothold within Wells Fargo & Co.'s investment offerings, could play a bigger role in its operations soon, according to a company executive.

The San Francisco company is considering offering wrap accounts made up of ETFs, said Lidiette Ratiani, senior vice president for investment consulting solutions for Wells Fargo Wealth Management Group.

"We use them fairly comprehensively throughout our investment solutions," she said. ETF wraps are "heavily under discussion — we are determining whether they would be appropriate on the retail side."

Her company already offers mutual fund wrap accounts to its retail customers. Wells Fargo offers exchange-traded funds though its retail brokerage, advisory, and trust platforms. The funds are particularly popular within separately managed accounts, where they make up 3% to 4% of the assets, Ms. Ratiani said.

What's more, Wells will incorporate ETFs into the unified managed accounts that the company plans to begin offering next year, she said.

The development of its ETF strategy is noteworthy because it exemplifies how banks are catching up with brokerage houses when it comes to the funds. "I think banks were a bit slow to react initially," said Melissa Nassar, a principal in Vanguard Group Inc.'s financial adviser group. "But there has been more adoption over the past two years."

Vanguard, which began to develop its exchange-traded fund lineup five years ago, has about $50 billion of ETF assets from banks and other institutions, Ms. Nassar said. "We're seeing ETFs used quite a bit in the wealth management and brokerage areas." It currently offers 38 funds.

Cerulli Associates in Boston said in a report released last month that ETFs present a potential threat to mutual funds for certain components of investors' portfolios. Advisers are attracted to ETFs for everything from their low fees to their usefulness in making concentrated bets in certain kinds of investments, the report said. The funds have a small share of the overall investment market.

Still, ETFs' share of the investment market remains small. In 2006, according to Cerulli, they accounted for 3.1% of assets under management in third-party retail investment products. Mutual funds accounted for 56.1%.

ETFs trade on stock exchanges but are similar to mutual funds in their liquidity. ETFs have traditionally been passive index funds since their debut in 1993, but actively managed ones are beginning to appear, which could make them stiffer competition for mutual funds.

Ms. Ratiani said it is too early to say which other investment products may lose share to ETFs at Wells, which manages about $70 billion of assets on its trust platform. The company began using the funds two years ago, largely because they fit strategically with its highly customized trust accounts, she said.

Wells' portfolio managers use what it calls "robust asset allocation" and select investments from multiple asset classes.

ETFs might be a perfect way to gain exposure to international markets such as China or India without doing the research required to pick stocks in those countries, Ms. Ratiani said.

"We're still actively managing the account, but bringing in certain passive investments," she said.

ETFs have been touted for features such as their tax efficiency, but "I don't think we put a great deal of emphasis on those things," she said, since her portfolio managers create tax efficient portfolios through other means. "It's more that we are trying to fulfill an asset allocation strategy."

Wells' ETF investors tend to be well-educated, high-net-worth individuals, and they tend to have the large portfolios to which the company applies its robust allocation approach, she said.

Its 225 investment managers have about 50 exchange-traded funds to choose from, and the list is expected to grow, she said.

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