Will ETF usage kill advice?
Novigi senior partner, Michael Quinn, believes the popularity of ETFs, which are approaching $200 billion in Australia, is a threat to the advice landscape.
In a webinar, Quinn and general manager of market strategy and propositions, Kevin Fernandez, discussed the future of financial advice and possible threats.
The latest figures from Betashares showed there are $195 billion in assets in the Australian ETF landscape which saw $1.2 billion in fund flows during April. According to a Betashares estimate analysing the sources of net ETF flows for 2024, advised funds make up 60.9 per cent during the year thus far followed by 26.7 per cent for retail flows and 12.4 per cent for institutional flows.
Quinn believes the vehicles’ popularity with consumers could prompt people to bypass advisers and invest directly into easily accessible ETFs.
He said: “The thing that could kill it all is ETFs, ETFs are taking over the investment world. Rather than making people think about their investment, they are making people go, ‘Well, I’ll just stick this in an ETF’. It lets them invest in the stuff that they think they should be invested in without having to pick any stocks and they are low-cost.
“In superannuation particularly, it is such a long timeline for people, ETFs could take over the world.”
But Fernandez disagreed, stating people seek financial advice for other reasons than just investment.
Previously, the top 10 benefits of receiving financial advice for consumers have been identified as having greater confidence in a comfortable retirement, improved financial wellbeing and improved financial decision-making, among others.
“Hopefully that’s not killing advice because we have established that people don’t get advice for help with stock-picking. People will still seek advice because they will want to know where to invest, how much to invest, should they do it via their superannuation,” he said.
The pair noted the Quality of Advice Review is seeking to make positive change to these problems and make the advice industry more affordable and accessible, but Quinn questioned what could happen post the next federal election if there is a change in government.
Quinn concluded: “Stephen Jones feels optimistic, take the handbrake off and have trustees nudge people towards these things, thinking about longevity, pensions and longevity products. But the next people might be awful, who knows where advice and regulation could go, such as if they try to regulate AI.”
Another matter touched in the second tranche of Quality of Advice legislation is the potential for superannuation funds to give advice to their members, but Quinn questioned how it would work given the shortage of advisers in the market.
“A trustee will never be able to have all of its advisers in-house,” said Quinn. “So that leads to this tension between members who are using their advice and members who are using advisers outside of their framework, but if you focus on the customer, then you have to provide them with the same information.
“How can you keep the technology and the experience the same with internal and external advisers?”
AUTHOR
Laura Dew
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