UK advisers should use ETFs far more than they do
Exchange-traded funds had an extraordinary year in the US in 2017, pulling in a record $463 billion. But the growth of ETFs elsewhere in the world has been much more modest, and the UK is no exception.
I’ll be honest, I’m slightly in two minds about all the hype surrounding ETFs. Like the mutual fund, they’re a great invention. But (again like mutual funds) there are far too many of them, and the sheer amount of choice on offer has turned what started as a neat and simple idea into something altogether more complex.
I’m alarmed, too, at the increasingly obscure nature of the ETFs coming on stream. The best ETFs by far are those that are passively managed and give investors broad market exposure at very low cost. But those are not the funds that tend to be advertised or written about in the media.
The other concern I have is that too people many treat ETFs like stocks and trade them far too often. For best results, investors should be putting their money away for a very long time. Just because you can, if you want, buy an ETF in the morning, sell it at lunchtime and buy it again in the afternoon doesn’t mean you should!
All that said, used the right way, ETFs are a very good way to invest, and I’m constantly surprised that there aren’t more UK advisers using them. According to new research, adviser platforms still hold only a tenth of their assets in passive investments, and just 1% in ETFs.
Throughout 2018, I’m going to be working with Elston Consulting to improve awareness and understanding of ETFs among the UK adviser community. Elston is hosting a series of workshops aimed at advisers who want to learn more about ETFs and the part they can play in client portfolios, and the first one will be staged at Amba Hotel in London’s Charing Cross on Thursday 25th January.
The first workshop is being sponsored by BMO Global Asset Management and Invesco PowerShares and it will focus on equity income ETFs, how they’re classified and how you should go about choosing one.
Elston’s Head of Research Henry Cobbe says: “What’s interesting is that there are actually seven different equity income indices for the UK market. They’re all constructed slightly differently, and that means they have different rules and different methodologies. That translates into different top-ten holdings, different risk and return exposures, and different biases inherent in those indices.
“This event will take a deep dive into those methodologies and will help advisers understand how to choose an ETF and how to compare them.”
Places at the workshop are limited, so if you’d like to attend on the 25th, you should sign up here:
For more information about the event, watch this video interview with Henry Cobbe:
ROBIN POWELL is the founder and editor of Adviser 2.0. A freelance journalist, he runs Regis Media, a specialist content marketing consultancy for financial advice firms around the world. You can follow him on Twitter and on LinkedIn.
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