Tracker funds offer rewards beyond ETFs: Defaqto

A six-page guide by the analyst, An Introduction to Exchange-Traded Funds, found ETFs have become more widely available on platforms and in self-invested personal pensions to reflect growing demand.

The guide said that while liquidity, low costs, market access and dealing flexibility make ETFs attractive, some trackers may have a better performance record.

Adrian Gaspar, senior consultant for Defaqto, said under the retail distribution review, it would be necessary for advisers to consider ETFs as part of a whole of market solution.

However, Mr Gaspar said: “While ETFs offer advantages to certain types of investors, it is worth remembering that there are several large and experienced providers of index tracking unit trusts and Oeics.

“Such providers are able to compete with ETFs on price and tracking error, have huge resource, a strong heritage in running index tracking solutions and offer funds that are perfectly suitable for investors who want exposure to an index, are taking a long-term view and have no need to trade funds intraday.”

The guide comes after iShares launched an accredited continuous professional development webinar course to help advisers increase and formalise their knowledge of ETFs.

Jason Witcombe, director of London-based Evolve Financial Planning, said: “ETFs have been a great addition to the financial services landscape.

“However, if you are buying funds through a platform, you may find it is cheaper to buy institutional units of a trust or Oeic compared with an ETF.”