FOFA drives ETF growth
The Future of Financial Advice (FOFA) reforms have helped drive flows into exchange traded funds (ETFs) and exchange traded products (ETPs), according to State Street Global Advisors.
Addressing a media teleconference for the October SPDR Bites, senior investment strategies, Rafiq Choudhury said the ban on commissions paid by fund managers to advisers accelerated the growth of ETFs.
“The removal of that really opened up the investment universe to advisers and investors, and really allowed them to change focus,” Choudhury said.
He added the low-cost, transparent nature of ETFs became more attractive to advisers on the back of these reforms.
The segment saw September inflows of $180 million, with the ETF segment alone sitting at $13.5 billion. The ETP segment, which included managed funds, was sitting at about $32 billion.
Assets under management (AUM) in 2016 increased by about 20 per cent, Choudhury added.
“In addition to that what’s also helped is the growth and breadth of the segment. Predominately this started out with domestic equities,” Choudhury said.
“You can now gain exposures to international equities, both hedged and unhedged, you can take regional positions, country positions, international domestic fixed income, commodities, real estate.”
The self-managed superannuation fund (SMSF) sector led the way for demand as members focused on asset allocation and low-cost implementation. This had now transitioned to the adviser space.
“Being able to buy a single ETF on the ASX200 in a single transaction and getting exposure to 200 different stocks is really attractive from an adviser perspective,” Choudhury said.
“The transparency of ETFs is actually something from a client perspective is very attractive. They can see that they’re holding a single ETF but they can go on to the ETF website and see all 200 stocks within the ETF that they’re holding.
Recommended for you
As ASIC chair Joe Longo pushes firms to prepare for the upcoming mandatory climate disclosure regime, what skills are necessary if firms are looking to expand their ESG teams?
First Sentier Investors has announced it will close four of its Australian investment teams amid a simplification of the business, with $14 billion expected to be returned to investors.
Over 90 finalists have been chosen to compete at the 36th annual Fund Manager of the Year Awards, to be held in Sydney on 13 June.
Clients may be asking their adviser whether there is still value in the US technology names after their rally, but Fidelity International’s Lukasz de Pourbaix believes they can still offer upside.
