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ETF model portfolios gain strong adviser interest

More advisers, particularly those servicing SMSFs, were looking at exchange-traded fund (ETF) model portfolios as a means to take risk off the table and ensure portfolios were as robust as possible, according to an ETF executive.

“The issue I’m hearing from advisers and their biggest concern is, to put it bluntly, not getting sued,” iShares head of Australia Jon Howie told selfmanagedsuper.

“They want to make sure that they’re building portfolios that will stand the test of time and that their clients aren’t going to come banging on the door when the markets get a bit wobbly and question why they’ve been put into that [product].

“Advisers want to make sure their investment decisions can stand up to any scrutiny when everything is hitting the fan.

“And that’s absolutely a valid way to approach this – start at the basics and get the basics right, so we can then add value around the edges.”

ETFs were one key way to add value, Howie said.

He revealed feedback from the iShares recent “Taking ETFs to the next level” roadshow in Melbourne showed there was very strong interest from sophisticated adviser groups in the implementation of ETF model portfolios to client bases.

“Specifically for advisers, it’s easier to build much better portfolios than what the average SMSF portfolio looks like by using ETFs,” he said.

“The industry has been talking about model portfolios for a long time and I think we’re now kind of getting there.

“We’re seeing a lot more interest from advisers around taking a simple ETF portfolio with a tactical asset allocation and running that across their client base.”

He said ETF model portfolios were much easier to implement than in previous years.

“There are enough products out there now that you can build quite robust tactical asset allocation models using just Australian-listed ETFs, so that’s made it relatively straightforward,” he said.

“There were situations in the past where there were key gaps in the product set, but we’ve reached the point where we’ve got broad enough tools to implement this.

“Also, with the advisers that we’re talking to, a lot are looking at the scalability question and making sure they aren’t doing bespoke portfolio construction for every single client.

“So it’s a bit of a shift in mindset.”

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