Financial Planning
ETFs set to continue dominance

Nearly one third of Australia's financial advisers will increase their use of exchange traded funds in client portfolios over the next 12 months.

This is a key finding from a recent Rainmaker adviser survey which showed that while 35% of advisers are yet to implement ETF strategies in their business, 94% of respondents are either highly or somewhat likely to ramp up their use of ETFs in the coming year.

Presenting the survey results at the Financial Standard Best Practice ETF Forum in Melbourne this morning, Rainmaker head of investment research John Dyall said further analysis of the statistic indicates that 29% of those advisers currently not using ETFs are looking to do so.

"While surveys are a blunt instrument, it indicates that a large proportion of advisers who are currently sitting on the sidelines are planning to implement ETF solutions in their client portfolios in the very near future," Dyall said.

"This is a phenomenal number. This is a tsunami of financial advisers planning on introducing ETFs to their clients."

Further, about 59% of financial advisers cited product providers as their primary source of information on using ETFs in client portfolios, with just 6% saying their licensee was of significant assistance.

Of the remaining respondents, 26% rely on in-house knowledge while 9% seek insight from asset allocation specialists.

"People get information in a vacuum, they get it from wherever they can, but for a healthy system we need a larger spread of information available to users of ETFs on how to use them - it would be preferable if the responses were a bit more balanced," Dyall said.

Turning to the drivers of increased use, over 80% of advisers are actively managing client exposures to asset classes and risk factors through ETFs while 43% considered positive investment ratings to be very important when selecting which ETF products to recommend.

Interestingly, 19% of advisers said ratings were not at all important to them when recommending solutions to clients.

According to Dyall, this suggests that perhaps the benefits afforded by ETFs have made them inherently more trusted within the advice community.

"ETFs are not a magic bullet. They are nothing special, they are just a means to an end. But, where they help you in your practices is that they have a degree of transparency and a degree of trust associated with them - people can look at them and understand them and their pricing. This is just one element in helping your client trust you and trust that you're doing the right thing by them," Dyall said.

"ETFs are not a world unto themselves. They are part of a continuum of a changing world and a changing industry, and a very vital part of that."

The survey included about 100 participants.

Read more: AustraliaRainmakerETF ForumFinancial StandardJohn DyallMelbourne
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