As assets invested in exchange-traded funds (ETFs) globally reach record-high levels (US$3.445trn at the end of November 2016 according to independent research and consultancy firm ETFGI), the benefits these products provide are going beyond the mass market and being increasingly recognised by wealth managers working with high net worth (HNW) investors.
Charging lower management fees than traditional mutual funds in most cases, ETFs have been attractive mainly for price-sensitive individuals who used services of brokerages. However, according to Verdict Financial’s Global Wealth Managers Survey, the majority of wealth managers agree that not just ETFs but exchange-traded products (ETPs) in general appeal beyond those individuals who invest on their own, or mass market consumers.
This view is common, particularly, among investment services providers in markets with easy access to a large number of ETFs. Specifically in the UK, 97.5% of wealth managers agree that ETPs are no longer just for independent investors. At the same time 93.3% agree that ETPs are no longer only for the mass market.
These views are reflected in the composition of the wealthiest individuals’ investments. Between 2015 and 2016, the proportion of ETFs in an average UK HNW investor’s portfolio increased by 60%.
As ETF providers are dedicated to launching new and innovative funds, and investors seek alternatives to traditional investments, we expect this trend to continue.