What Advisers Really Think: Poll Results Revealed

Our first ever ETF Virtual Conference for UK advisers this month was a great success in terms of attendees and quality of content, but one thing was clear – how much work is still to be done.

Education has become a massive focus for ETF providers, and we at ETF.com often find ourselves going back to basics: What is an ETF? How can I use it? Where do I trade it?

And it’s not just education. Advisers also need the facilities to access, research and buy ETFs in the first place. Some of these facilities are still sorely lacking.

We polled our audience of financial advisers in the UK, which included a minority of other industry participants, on six questions, and got some surprising results.

1) Do you currently invest in ETFs?

57% YES

43% NO

Allowing for more “yes” votes due to our assembled audience than you might find through other trade publications, it is clear that advisers are using more passive and low-cost products two years after the Retail Distribution Review came into force.

In fact, the UK regulator discovered this week that advisers are using more passive funds in order to maintain higher charges for advice than pre-RDR.

2) Do you own any smart beta ETFs?

15% YES

85% NO

This result is definitely not surprising. Although the likes of Ernst & Young predict that smart beta ETFs will be a key factor for driving ETF industry growth, the vague term “smart beta” is borne with a grimace by the industry and even sometimes with suspicion by the retail investor.

Certain strategies like dividend-oriented ETFs are increasingly popular as retail investors are on the hunt for yield in a low interest rate environment. However, it might take years before smart beta ETFs are considered more mainstream products or become a standard feature of an adviser’s portfolio.

3) Do you currently use a fund platform to invest in ETFs?

50% YES

50% NO

ETF.com retrieved a perfectly divided audience on this question.

The number could be higher, but trading technology and choice of ETF on platforms are just two factors holding back growth. Consider that the largest advisory platform in the UK with over £64 billion worth of assets under administration is Cofunds – and it doesn’t offer ETFs.

A recent survey backed this up from services provider Dunstan Thomas, released in September, which found that advisers are clamouring for more ETFs on platforms.

4) Do you have enough info to choose and compare different types of funds?

36% YES

64% NO

Where can advisers go to get a complete, up-to-date database of ETFs listed on the London Stock Exchange?

One obvious plug is our data, provided in our quarterly magazine ETF Report UK, and it is also available online in PDF format.

Another source is www.whichetf.co.uk, founded by adviser Stephen Walters, who filters available funds for retail investors.

Direct broker platforms like Hargreaves Lansdown also offer comprehensive information on a large group of LSE-listed ETFs. Other than that, advisers might be left to trawl the “search” function on the LSE website or wade through issuers’ marketing material.

5) Would you invest in an ETF-only portfolio?

63% YES

37% NO

Again, the results may swing in favour of ETFs due to the nature of our audience. However, the popularity of ETFs, and ETF-only portfolios is growing, not least as evidenced by the likes of new money managers such as Nutmeg or ETFmatic.

However, there are still certain asset classes which are difficult, or impossible to replicate via passive funds, and this often includes things such as property and alternative strategies. Even Nutmeg will use the occasional actively managed fund to replicate certain exposures where a passive fund is not available.

6) Do you take into account rising rates when you allocate to fixed income?

95% YES

5% NO

The most clear-cut result we have in the whole survey shows that the vast majority of our respondents think about interest rates when they allocate to bonds.

No wonder, considering the amount of media headlines over the Bank of England, the European Central Bank and the Federal Reserve’s movements. Rates are expected to rise from their current record lows in the UK and the U.S. in the second half of 2015, but the timeframe has been constantly changing.