Advisers turn to ETFs, especially for younger investors

More financial advisers are recommending low-cost exchange traded funds (ETFs), new research has revealed.

Nearly a third (30.9%) of buying volumes from advisers was directed to ETFs in 2023, according to figures just released by wholesale trading platform AUSIEX, up from a quarter in 2022.​

The figure was even higher for younger advised investors, with ETFs accounting for almost half (49.2%) of buy trades via advisers for those aged between 18-24. This was a 5% increase on 2022.

For those aged between 25-49, ETFs made up more than a quarter (24.7%) of the buying volumes from advisers in 2023, over the past two years.

Brett Grant, Head of Product, Marketing & Customer Experience at AUSIEX, said: “Over the past two years, ETFs have become an increasingly important part of advisers’ investment strategies, in part due to market uncertainty.

“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,” 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.”

Mr Grant added: “They are also increasingly offering advisers new ways to engage with the next generation of investors, considering the types of exposures which can now be achieved with them and how they can be aligned to individual investor values.”

Three advantages of ETF investing for advisers

According to Mr Grant, ETFs are gaining popularity with advisers for several reasons:

1. Diversification: ETFs can be used to gain exposure to an array of asset classes, investment trends thematic and regions, helping to create instant diversification for investors.
2. Cost efficiency: ETFs are traditionally low cost compared with managed funds, offering value for clients.
3. Liquidity and transparency: ETFs trade on stock exchanges like individual stocks, providing intraday liquidity. Additionally, the transparent nature of ETF holdings allow advisers to make informed investment decisions.