UK uptake of exchange traded funds will be helped by a boost in younger advisers, according to German asset manager DWS.
Sam Manchanda, head of UK coverage at DWS, said: “ETFs have been popular in Europe for a very long time but now there is a momentum and potential pick up, particularly from retail investors, in the UK.”
Manchanda said changes to cash Isa limits rumoured to be coming in November’s Budget could push more UK savers to investing in ETFs.
“We are very interested to see what will happen in November. Regardless of whether there will be any change in that space, the industry committed to pursuing the greater involvement of retail investors in investing rather than saving,” he said.
DWS has more than 250 ETFs which it offers to European clients.
At the moment the demographic of retail investors in ETFs is “very narrow” – in the mid-30s age bracket.
Toby Dudley-Smith, team lead for wholesale coverage in DWS’ UK team, said education for financial advisers and wealth managers is key to the success of ETFs in the UK.
“Without financial advisers we would not have penetration through to the end client,” he said.
���If they do not understand the product and how to build a portfolio [using ETFs] then they are not going to recommend them to clients.”
Dudley-Smith said education has improved this, as has the changing demographic of financial advisers.
You will get a new generation of advisers coming through who are a bit more literate when it comes to understanding ETFs
He added: “That transition from just active funds is changing but the big driver is the adviser age gap lowering.
“You will get a new generation of advisers coming through who are a bit more literate when it comes to understanding ETFs.”
He said this pattern of younger advisers being more interested in ETFs for their clients is something DWS has seen over the past five years.
For advisers, one barrier to ETFs is platforms not allowing fractional dealing which can make it harder to deal the funds.
Dudley-Smith added: “The retail platforms have moved extremely slowly to make ETFs available to all investors but I suspect that a lot of them are coming under increased pressure from neo-brokers.
“There are now a few intermediaries working with these platforms to offer fractional trading.”
tara.o’connor@ft.com
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