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Adviser ETF take-up continues

An overwhelming number of financial advisers are recommending exchange-traded funds to clients in place of active management strategies, according to a VanEck survey.

After canvassing 547 financial advisers, VanEck's 2021 Australian Smart Beta Survey found that 91% use ETFs in client portfolios, up from 87% in 2020.

Over half (56%) use smart-beta ETFs, otherwise known as strategies that track an index, to replace for actively managed products. Almost all the respondents (99%) said that they are satisfied with their smart-beta strategy.

Most advisers use at least two smart-beta strategies. The minority of non-users (9%) said they did not use smart beta ETFs because they only use actively managed funds and that  they do not know enough about them.

VanEck chief executive and Asia Pacific managing director Arian Neiron said that strong performance of ETFs is the number one reason for advisers' take-up, followed by diversification, reduced volatility and improved risk-adjusted returns.

The entrenched underperformance of actively managed funds, which typically charge much higher fees, is also facilitating the growth of the ETF market, he said.

The findings form part VanEck's major survey of ETF investors, which had at total of 3047 responses.

Broadly, self-directed or retail investors are also flocking to ETFs; some two thirds invest directly while one third invest via their self-managed superannuation fund.

Most of these retail investors (71%) do not use a financial adviser as they do not see value in it (43%), in addition to costs (21%) posing a barrier.

"As knowledge of ETFs grows, and their benefits, flows into the sector are expected to maintain their momentum," Neiron said.

Read more: VanEckArian Neiron