First Trust’s sales-first culture landed it in hot water with regulators in 2025, contributing to a Parent rating downgrade to Below Average from Average.
The firm goes to great lengths to stay in front of advisors by offering educational sessions and working together to provide solutions. This may benefit investors indirectly, but the firm’s intentions are called into question by a USD 10 million fine imposed on First Trust by the Financial Industry Regulatory Authority, which determined that the firm preconditioned advisors to use First Trust products by violating noncash compensation limits. As part of the Finra settlement, First Trust neither admitted nor denied the charges.
There are other concerns here. While exchange-traded funds represent the bulk of the firm's USD 342 billion in assets under management, First Trust bypasses the competitive market for low-cost beta funds, instead opting for more-complex strategies with higher management fees than peers charge for similar ETFs. And although the firm has traditionally stood behind its funds with few closures, recent single-stock options-related ETF launches are trendy and lack enduring investment merit.
First Trust has grown considerably over the past decade and now ranks among the largest providers of ETFs, as well as unit investment trusts—a vehicle that has lost popularity among competitors since the 1990s but still represents a considerable portion of First Trust’s AUM.
The firm is a private partnership, controlled by CEO Jim Bowen, and many senior managers are limited partners. This ownership structure helps the firm retain talent and can create alignment between the firm and its clients. As it has grown, the firm has expanded its investment team and beefed up its technology infrastructure.
Note: This share class' Parent Pillar rating is analyst-driven, as its Branding Name, First Trust (Branding Name ID: BN000008SE), is covered by Morningstar Manager Research.
United States