Platforum’s latest UK fund distribution report published this week, Tracker funds and ETFs shows that the vast majority of advisers (94%) are using passives within client portfolios but they are blending active and passive funds.
Higher transaction costs for ETFs on adviser platforms continue to be a barrier to adoption by advisers – assets in ETFs remain at 1%. But this is not an obstacle for self-directed investors. On five of the 15 major direct platforms it is cheaper to hold a portfolio of ETFs than of funds.
Platforum Research Director, Miranda Seath, comments:
“Advisers continue to use tracker funds more extensively than ETFs. Our research suggests that advisers are using tracker funds as building block funds in portfolios to bring down the cost of investing or for diversification. Most advisers are blending active and passive funds within portfolios.
We have seen little year-on-year increase in ETFs on platform. Many advisers continue to see the ETF structure as higher risk than mutual funds, citing liquidity concerns as a barrier to investing.
The vast majority of advisers (93%) transact ETFs through platforms yet structural issues on platforms remain a problem. 29% of advisers see higher transaction costs as a barrier to recommending ETFs. But in the direct platform world, high transactions costs are not an obstacle for self-directed investors.
There is some light at the end of the tunnel: platforms are taking steps to improve ETF functionality. There is no difference in transaction costs between ETFs and funds on 7IM, Alliance Trust Savings, AJ Bell Investcentre, Ascentric, and Raymond James. Novia, Hubwise and Allfunds, the largest European platform, now offer fractional trading of ETFs: helpful for investing smaller, regular amounts into ETFs or for portfolio re-balancing. And Aegon will make ETFs available to former Cofunds users this year with Old Mutual Wealth following suit once it re-platforms. Indeed platform issues appear to be less important to advisers in 2017 than in 2016: 50% of advisers now see no barrier to investing in ETFs on platform.”
Notes for editors
For more information about the report findings, please contact
Miranda Seath, Research Director
firstname.lastname@example.org, +44 (020) 7943 8049