Advisers seeing appeal of ETFs to serve younger investors
ETFs are becoming increasingly attractive to financial advisers for their younger clients, according to AUSIEX, as way to provide them with diversification and a balanced portfolio.
According to data released by AUSIEX, ETFs made up almost half of buy trades made through an adviser for investors aged 18 to 24, at 49.2 per cent in 2023, rising by 5 per cent from the previous year.
Brett Grant, head of product, marketing and customer experience at AUSIEX, said advisers are increasingly recommending ETFs to expose young investors to a range of asset classes and develop a well-balanced investment portfolio.
“Today, ETFs continue to offer a diversified, low-cost exposure to an index or specific thematic, allowing advisers and their clients to gain exposure to a range of asset classes in a single transaction,” Grant said.
According to the data, ETFs overall are becoming more popular among financial advisers as nearly a third of buying volumes from advisers were directed to ETFs in 2023.
The figures showed that for investors aged 25 to 49, ETFs made up almost a quarter of the total buying volumes from advisers, at 24.7 per cent for 2023.
“Over the past two years, ETFs have become an increasingly important part of advisers’ investment strategies, in part due to market uncertainty,” Grant said.
ETFs are gaining favour among advisers as they can help create an instantly diverse investment portfolio and expose their clients to a large range of asset classes and investment trends, which is particularly valuable for young investors, according to Grant.
He added that they offer higher value for clients as ETFs are usually low-cost compared with managed funds, providing a more accessible starting point for young investors.
The transparency of ETF holdings is also appealing to younger investors as they are able to make more informed decisions about their investments and where they want their money to be used, he said.
"By taking advantage of ETFs, advisers can construct well-balanced portfolios tailored to the unique risk tolerance and financial goals of their clients,” Grant said.
These figures follow Global X’s quarterly ETF market report, which showed bond ETFs attracted about 37 per cent of the market’s net flow last year, an increase from 25 per cent in the previous year.
According to Global X’s David Tuckwell, fixed income ETFs have had significant growth amid the 2023 interest rate hikes coming off the back of COVID-19, making them a better value proposition.
He suggested that financial advisers are driving the popularity rise as well, as they are increasingly recommending fixed income ETFs for clients looking for more secure investments.
“From a financial adviser’s perspective, and from their client’s perspective, bond ETFs and fixed income ETFs are now providing something very useful in a generous income stream,” Tuckwell said.
However, he noted that due to the inflation rate coming down, now is the time to invest in ETFs while the rates are still high.
Recommended for you
The Financial Services Council has appointed a new deputy chair for its board.
ASIC chair Joe Longo has told compliance professionals they need an “attitude of compliance” beyond written policies, how can AFSLs achieve this without alienating their advisers?
Peri and menopause training founder and TV journalist Shelly Horton has hit back at calls for businesses to introduce menopause leave.
Pendal has told investors it will start winding up its Enhanced Credit fund from December, its third fund closure this year.