The proprietor of Leeds-based Klonowski & Co said he had been looking at the rise of so-called ‘smart beta’ index products but considered them to be too complicated and restrictive for most clients.
He said: “Using passives within a portfolio is a good idea for asset allocation, and I do use ETFs where appropriate for a client.
“I don’t think that developing all sorts of clever ‘smart beta’ index structures will benefit most retail clients. They want simplicity, low cost and diversification.
“I will use ETFs within portfolios when the client cannot get the right index-tracking fund otherwise, for example, if he or she needs exposure to commodities.”
However Mr Klonowski said he would avoid the more esoteric ETF products, especially the synthetic, non-physically-backed products, because “the more you look into them, the more you find the hidden charges and that takes away the value in using a passive fund”.
His comments came as discretionary manager Canaccord Genuity Wealth Management used mid-cap stock ETFs to boost portfolio exposure to the sector.
According to Robert Jukes, the firm’s global strategist, mid-cap equities in the UK were looking more appealing so the team bought the iShares FTSE 250 ETF.