Financial advisers have been increasing their use of passives in recent years, although this consists almost entirely of index tracker funds. ETFs have still largely failed to gain traction in the adviser community.
Advisers have different views on how passives should be used within portfolios – some advisers have gone all-in on passive strategies whilst others remain sold on the benefits of active management and wouldn’t touch passive investments with a barge pole. However, the largest proportion of advisers prefers predominantly active portfolios, with maybe a sprinkling of passive.
Although their clients may well have exposure to ETFs within multi-asset funds and DFM model portfolios, few advisers would directly recommend an ETF or include them within advisory models. Advisers continue to heavily favour the mutual fund structure when looking for passive exposure within their clients’ portfolios.
‘If it ain’t broke, don’t fix it’ seems to be the prevailing view, with advisers saying they intend to carry on much as they have done until now. Our research suggests that there’s no watershed moment on the horizon for direct use of ETFs by advisers – open-ended index tracker funds look set to continue as the principle passive vehicle within client portfolios.
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