ETF surge drives adviser value

The continued interest in exchange-traded funds (ETF) from SMSF trustees had generated a stronger need and desire for financial advice and expertise, according to an industry paper.

The AMP Capital SMSF Suite “Black Sky Report 2016” aimed to highlight any professional opportunities that existed within the rapidly evolving SMSF category.

Part three of the report, “ETFs: The surge continues”, found 29 per cent of trustees were hesitant to invest in ETFs due to a lack of knowledge.

“This is a key barrier to entering this burgeoning asset class – presenting an opportunity for [advisers] to fill the gap with their product knowledge and market expertise,” the report said.

“Even among trustees who aren’t interested in managed funds, ETFs could be a solution for 46 per cent of these trustees.”

With the big shift in asset allocation and the increased adoption of ETFs, there was a huge opportunity for advisers to act as an educator on the asset class for their clients, it said.

In fact, 14 per cent of all SMSF investors surveyed said they would be willing to invest further if they had access to “professional advice relating to ETFs and more education”.

“As trustees become more nervous about making investment decisions, they are seeking guidance in the direction they should take,” the report said.

“As such, they are actively seeking external sources of advice to validate their decisions and access new investment classes – including ETFs.

“In fact, ETFs directly demonstrate the value you bring to clients as they are effective in reducing overall costs of a client’s portfolio and provide diversification opportunities.”

It revealed ETFs were the strongest growing sector of interest for SMSF trustees, with ETF adoption soaring 55 per cent from last year’s findings.

A further 25 per cent of trustees surveyed intended to invest in ETFs in the future, including 18 per cent who intended to do so in the next 12 months.

When it came to the reasons for using ETFs, trustees regarded them as a way to easily access hard-to-reach assets, with 67 per cent showing an appetite for international equity ETFs, followed by 34 per cent interested in infrastructure ETFs.

According to the Australian Securities Exchange, total market capitalisation of the exchange-traded product market was $30.62 billion in February, up from $16.98 billion in February 2015.

The report was based on new research data from Investment Trends.

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