85 per cent of brokers and advisers say they expect to increase ETF allocations during 2010/2011..
Russell expects ETF market to double in coming year.
Russell Investments has today revealed findings from a recent survey that found an overwhelming majority of brokers and financial advisers (84%) expect to increase their use of Exchange Traded Funds (ETF) over the next 12 months. Russell expects the move to abandon commission based selling will be a key growth driver for the sector with 89 per cent of respondents citing ETFs as a suitable product for fee for service models.
According to the survey results, seven in 10 brokers and advisers currently allocate less than five per cent of their clients’ portfolios to ETFs, signalling the strong growth prospects in the market.
The survey was conducted in May 2010 as part of Russell’s launch of its new ETF – the Russell High Dividend Australian Shares ETF (RDV). RDV is based on a new index purposefully built by Russell, containing 50 blue chip Australian shares with a bias towards companies that are expected to pay above average dividends. One hundred advisers, brokers and other industry participants participated in the survey which aimed to gather feedback on Australians’ ETF appetite.
The vast majority of advisers and brokers surveyed (80%) expected the number of client enquiries on ETFs to increase this year. Amanda Skelly, Russell’s director, ETF product development – Australasia, said the results were an exciting indicator of the market’s future growth potential.
“ETFs are one of the fastest growing investment instruments in the world with a growth rate of over 50 per cent annually over the last 10 years. Although it’s still early days for the Australian ETF market, there is already strong growth and Russell expects the Australian market will see a similar growth pattern over the coming decade,” Ms Skelly said.
“As more advisers embrace the fee for service model ahead of regulatory change, investors and their advisers are increasingly attracted to the no commission, simple and tax effective structure of ETFs. We expect these benefits will contribute to a doubling of the Australian ETF market over the next 12 months,” said Ms Skelly.
When questioned on which type of investors ETFs were most suited to, respondents concluded Self Managed Super Funds (65%) and Gen Y investors (43%). This reflects findings from earlier research conducted for Russell which identified the need for products specifically tailored to SMSF investors.
“Our research shows SMSF investors are looking for high income, franking credits, capital growth and diversification. We saw an opportunity to create an ETF that provides investors with a simple, low-cost way of accessing a diversified blue-chip Australian shares portfolio that meets these investment priorities in a tax effective structure,” Ms Skelly said.
Results from the survey also showed respondents were confident RDV would achieve capital growth and higher dividends, with 100 per cent of respondents expecting RDV to be effective to very effective at achieving these goals. Additionally, 70 per cent of respondents said they were likely to recommend RDV to their clients
Source: ETFWorld – Russell
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