European exchange-traded fund provider Source has pledged to work more with financial advisers to help educate them and their clients about the use of ETFs within portfolios.
According to Lee Kranefuss, chairman of Source, the company has seen strong inflows into its ETFs, but through talking with financial advisers, Source believes the intermediary market could continue its upward trajectory.
He said: “The UK and European markets have huge potential for further growth. We polled more than 100 IFAs in the UK and found that 14 did not fully understand ETFs, and 34 per cent said that their clients do not fully understand them.”
As a result, Mr Kranefuss said Source has launched a multi-million-pound advertising and marketing campaign to help raise its profile, as well as enhancing the educational material on its website to help IFAs.
This came as Source announced a net inflow of US$3.4bn (£2.23bn) assets so far this year (as at 15 September).
34 per cent of IFAs expect clients to increase their exposure to ETFs over the next year
126 new ETFs and ETPs were listed on the LSE in 2015
Total of 1,200 on the LSE
Total value of ETFs traded on-exchange on the LSE is £175.7bn in 2015, up 61 per cent compared to the same period in 2014
Just over half of this US$1.8bn (£1.18bn) has been into fixed-income ETFs, with US$1.3bn (£0.85bn) into equity ETFs and US$0.3bn (£0.19bn) into commodity products.
Most of the European investment in ETFs has come from institutional investors, but Mr Kranefuss said there would be a significant increase in demand from retail investors, primarily through their advisers.
Its poll claimed that, over the past 12 months, nearly one in five financial advisers said their clients had already increased their exposure to ETFs, with 34 per cent expecting them to do so in the future.
In September, data from the London Stock Exchange revealed there are more than 1,200 ETFs and ETPs listed on its main exchange, and the total value of ETFs traded on-exchange this year stands at £175.7bn.
Gillian Walmsley, head of listed products at the LSE, said: “London has long been seen as the capital of the ETF industry in Europe, with deep liquidity and a strong emphasis on promoting transparency.”
Several platforms have added ETPs for advisers, either directly or through discretionary fund management firms. Such platforms include True Potential, SEI, Novia Financial and Transact.
Evrin Erdem, head of investment for Somerset-based Copia Capital Management, part of Novia Financial, said: “We invest heavily in ETFs and use a quant-based investment strategy that had previously mainly been the prerogative of the institutional investor.
“The use of passives such as ETFs in the model portfolios enables us to access more specific targeted markets, sectors and asset classes than the use of trackers alone would allow.”