Demand for exchange-traded funds (ETFs) is only set to climb higher, with over one-third of financial advisers planning to lift their ETF allocation in the next 12 months.
Adviser Ratings’ Australian Financial Advice Landscape 2024 report, which surveyed 1,302 advisers, 580 advice practices, and 1,325 Australian consumers, demonstrates how advisers are increasingly turning to ETFs as an investment vehicle to meet client interest.
The report found that 36 per cent of advisers are planning to increase their ETF usage over the next 12 months.
Some 42 per cent are planning to leave their ETF allocation unchanged, while 20 per cent have not or do not plan to use the investment vehicles, and just 2 per cent are looking to decrease their ETF allocation.
“ETFs will be the flavour of choice for most advisers in the next 12 months, with more than a third planning to lift their allocation,” the report stated.
In total, the data indicates that 78 per cent of advisers are planning to either grow or maintain their use of ETFs in managing client portfolios.
Moreover, these funds are helping advisers capture investor interest for specific megatrends. Speaking on a recent Relative Return episode, Manny Damianakis, head of sales at Global X, discussed the popularity of thematic ETFs and the benefits they offer advisers.
Adviser Ratings’ report continued: “More recently, advisers have been using ETFs to tap into innovative, transformative trends and asset classes that have only exploded onto the scene in the past five years.
“Take for example bitcoin, artificial intelligence (AI) and semiconductors, which were both foreign concepts not long ago but now have investors scrambling for exposure. While ESG as a theme has declined, opportunities in commodities and AI have increased, and passive investing through ETFs continues to boom.”
Amanda Graham, private wealth adviser at Shaw and Partners, noted in the report that what clients are seeking in an ETF has rapidly changed as fund providers expand their suites.
She described: “Initially, ETFs were perceived as a quick way to give clients broad global equities exposure, but now clients are really leading the conversation and telling both advisers and the market where they see the biggest potential.”
In particular, the private wealth adviser recognised client demand to capture AI’s benefits – from healthcare advancements to productivity improvements.
The research exhibited that 17 per cent of Australians, or 3.5 million consumers, are seeking exposure to AI.
“Younger clients in particular have a desire to stay ahead of the curve and be early adopters. They are looking at exposure into areas such as AI, or for many, investing in line with their core values, carbon reduction focused companies as an example,” Graham added.
“At the same time, there’s a growing awareness of stock-specific risk in these promising new investment areas, so ETFs may offer the right balance.”
