More can be done to get advisers on board with exchange traded funds, according to Terry McGivern, senior research analyst at AJ Bell.
McGivern said solving friction within platforms and speaking to advisers about the benefits of ETFs could encourage more to use the funds.
At an event on Thursday (September 18), he said while retail investors have adopted ETFs through AJ Bell’s consumer platform, it was not the same on the advised platform.
He said: “If you look at adviser platform that story is very different. Advisers have not been quick to seize the opportunities.
“Advisers will use index funds but have been slow to take up the ETF banner.”
Part of this, said McGivern, was platforms not allowing fractional dealing, making it harder to trade ETFs – Though he said this should not necessarily be seen as deal breaker for advisers.
He said: “I think solving some of the friction you have got with platforms [would help] and education for advisers that they can build an MPS with ETFs.
“Let’s meet advisers where they are and get into rooms with advisers to explain why ETFs are much better for their clients. I think we can definitely get advisers on board.”
McGivern added that AJ Bell use ETFs extensively in its passive MPS portfolios, despite the lack of fractional dealing on platform.
He said ETF issuers are now more focused on making their products investable, even in a non-fractional dealing environment.
This includes issuers launching their products with low unit prices, something that was not always the case.
However, even without fractional dealing, he called ETFs a “superior choice” for investors.
McGivern also said the demographic of the adviser market could also be playing a part in the slower adoption of ETFs.
He said: “There is a large part of the adviser market that is close to retirement age.
“If I speak to a younger adviser they are very pro-ETF so it is a generational thing and I think there will be a natural shift as that demographic changes.”
His comments were made at an event celebrating 25 years of the ETFs in the UK, hosted by Franklin Templeton.
The company’s head of ETF distribution, Emea, Caroline Baron, said ETFs have “stood the test of time” after initially being deemed to be short lived.
tara.o’connor@ft.com
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