Advisers’ favour sees ETFs capture greater inflow

Investment Trends has revealed Australian advisers are increasingly turning to ETFs to provide portfolio diversification, while new inflows for unlisted managed accounts have seen a double-digit drop.

Based on a survey of some 1,505 financial advisers, Investment Trends’ 2025 Adviser Product and Marketing Needs Report found that, excluding managed accounts, advisers intend to funnel almost a quarter (24 per cent) of their new non-superannuation inflows into ETFs, up from 21 per cent in 2024.

In particular, Investment Trends said advisers are also expanding their use of active ETFs across all asset classes, but especially where structure, access and cost-efficiency are key.

Looking at what is driving this interest, the report found that almost four in five advisers indicated diversification was a primary benefit of using ETFs, up from around 60 per cent the previous year.

Cost benefits were also noted among ETF benefits, including competitive pricing and their ability to bring down fees in the overall portfolio, as well as accessibility gains with ETFs providing access to specific overseas markets and types of investments or asset classes that may have been otherwise difficult to access.

Speaking with Money Management, Investment Trends director and head of global research Cameron Spittle said this growth demonstrates a shift in perception among financial advisers as to how ETFs can be utilised.

“The perception has been that ETFs were just for passive investments, but increasingly we’re seeing that it’s not just passive, it’s also active investments where ETFs are being leveraged.”

Notably, as ETFs have grown in favour, non-super inflows into unlisted managed funds have dropped considerably and now account for less than a third (31 per cent), down from 43 per cent in 2024.

While this doesn’t mean assets are being directly transferred from unlisted managed funds to ETFs, Spittle said the ETF allocation is “starting to mirror what the allocation has been historically for unlisted managed funds”. 

He added: “Where historically, allocations would have been more to simply passive strategies, we’re now starting to see the intention of advisers to replicate, perhaps, what they had in unlisted funds.”

This change in perception, Spittle explained, has been driven largely by the way advisers are now allocating funds, but also as a response to investment managers launching more offerings.

“There’s been a large number of ETFs that have been launched to the market in the last 12 to 18 months, and many of those are replicating existing active structures in unlisted managed funds and making them available in an ETF,” he said.

“So, you’ve got product providers or product manufacturers creating/replicating products in ETF structures, you’ve got advisers that are looking for the flexibility, and you’ve got clients that are also creating the demand. So, I think it’s threefold in terms of how that’s playing out.”

Money Management previously covered how adviser demand was fuelling ETF launches as it is estimated around two-thirds of flows come from intermediary products. In particular, launching an active ETF version of an existing managed fund is a way for fund managers to offer a product that is more accessible for the retail and wholesale market as they seek to broaden their distribution.