Survey reveals rising ETF preference among advisers

According to findings released by VanEck on Monday, financial professionals have expressed a growing preference for exchange-traded funds (ETF).

The asset manager’s research indicates that this investment product is becoming the preferred choice for advisers, driven by evolving portfolio strategies and the superior performance of ETFs compared to active funds.

The annual survey of Australian financial professionals revealed that 70 per cent of respondents had allocated to ETFs more frequently over the last 12 to 18 months (up from 62 per cent last year), with almost all financial advisers (95 per cent) indicating they use ETFs (up from 91 per cent in 2021 and 87 per cent in 2020).

“The findings from our latest survey demonstrate an overwhelming preference for ETFs by financial professionals,” said Arian Neiron, CEO and managing director at VanEck Asia-Pacific.

Changes in economic outlooks have led to increased usage of ETFs, according to the research, with 42 per cent of financial professionals citing shifts in portfolio strategy as a primary reason for their heightened adoption. Additionally, reduced portfolio costs (49 per cent) and greater internal knowledge and awareness of ETFs (36 per cent) ranked among the top three drivers for 2024.

“Advisers want more control, better relative performance, and greater cost efficiency, and ETFs are uniquely placed to offer all three,” Neiron said.

He shared that the survey found that of the 47 per cent of respondents who had an existing smart beta allocation, most (59 per cent) used at least two of these strategies across their client portfolios, 64 per cent found they outperformed active strategies, and 99 per cent were satisfied with their smart beta investments.

Smart beta, as Neiron explained, represents an evolution of first-generation ETFs. Unlike traditional ETFs that simply track market capitalisation indices, smart beta strategies employ more sophisticated investment approaches aimed at achieving targeted outcomes, often at a fraction of the cost of active management.

“Smart beta strategies have transitioned from market disruptor to the mainstream. A significant proportion of practitioners are incorporating smart beta ETFs into portfolios, with one in two respondents saying they had an existing allocation and a further 21 per cent currently evaluating them,” Neiron said.

“We anticipate a greater adoption rate as more financial professionals become acquainted with the benefits and portfolio construction opportunities of smart beta ETFs.”