Europe's ETF Issuers Cite Access to Platforms as Major Hurdle

Nailing distribution named a top factor for success in PwC survey of 70 global executives.

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Reviewed by: Ron Day
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Edited by: James Rubin

European ETF issuers say gaining access to broker-dealer platforms is among the top distribution challenges, according to a survey by PwC.

The report, titled ETFs 2028: Shaping the future, said access to platforms—key in developing a strong distribution channel in Europe—was their number one challenge.

The survey, which questioned 70 executives globally, found that 85% believe distribution was the most significant factor in the success of their ETF business.

Having sufficient tools and resources, including online platforms, customized reporting and ETF model portfolios ranked as the second biggest challenge for European providers.

This is particularly pertinent in Europe, where respondents noted the value of ETF savings plans in attracting retail investors.

European asset managers said it was the most important factor for attracting retail, with 76% believing it was ‘very important’, followed by investor education (67%) and customer experience (61%).

It comes as the generational shift of wealth from boomers to millennials is tipped to reach $68 billion globally by 2030, driving the European ETF market to $3 trillion by June 2028, up from $1.8 trillion at the end of 2023.

Millennial ETF Investors

Marie Coady, global ETF leader at PwC, said: “Firms will need to find ways to reach those millennial investors who typically manage their own investments. Marketing through social media platforms, podcasts and apps will be important to target these millennials who prefer real-time information.

“The race to keep pace with today’s generational shifts and demands for personalised financial solutions will divide the winners from the losers in this fast-evolving ETF and wider asset management arena.”

Technology capabilities are likely to play a huge role in this, with online platforms and investment apps ranked as having the biggest impact on the ETF industry over the next two to three years, followed by machine learning and artificial intelligence.

“ETF issuers need to lead the way on product innovation and business model transformation, with the unprecedented pace of change due to technological and AI disruption," Coady added.

"There are opportunities to expand into new investment strategies, access new investors, new distribution channels and enter new emerging territories for distribution of ETFs."

Despite this, private banks are still expected to be the biggest driver of growth over the next few years (62%), followed by retail investors (57%) and model portfolios (57%).

In terms of product trends, there is also expected to be growing demand for active ETFs in the next two to three years, with 91% seeing some sort of demand over the period.

Active ETFs have experienced strong growth in Europe with assets under management (AUM) hitting $32.9 billion at the end of 2023, according to ETFbook data.

Theo Andrew joined ETF Stream as a senior reporter in September 2021. He has over four years of investment writing experience spanning pensions and retail investments, most recently at Citywire, where he was a senior reporter covering environmental, social and governance investing.