Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 298

More ETF users are younger and female with ESG focus

The 10th annual BetaShares/Investment Trends ETF Report provides a snapshot of the key statistics and drivers in the Australian Exchange Traded Fund (ETF) industry, from the perspective of self-directed investors, SMSFs and financial advisers. The latest report shows a record numbers of investors have entered the Australian ETF market, with some changing characteristics.

Key findings of the report

The insights collected from this round of research are based on responses from around 8,000 investors and 800 advisers:

  • The number of ETF investors in Australia grew by 22% in the 12 months to October 2018, reaching a record high of 385,000.
  • The number of investors holding ETFs through an SMSF rose to 120,000 from 105,000 the previous year, an increase of 14%. Diversification and access to overseas markets are the main drivers for this market.
  • Growth in non-SMSF investors was even stronger, with an increase of more than 24% from 213,000 investors in 2017 to 265,000 in 2018.
  • With increasing mainstream take-up of ETFs, the average age of ETF investors has fallen. 29% of ETF investors are millennials, up from 19% in 2013.
  • The use of ETFs by financial advisers continues to grow, with more than half of all advisers (53%) now recommending ETFs (up from 45% in 2017).

SMSF usage remains strong, and non-SMSF take-up is growing even faster

SMSF ETF investors as a percentage of the total ETF market declined from 33% in 2017 to 31% in 2018, reflecting a surge in the number of self-directed investors who are utilising ETFs outside of SMSFs (up by 52,000 from 2017).

Diversification remains the primary driving factor for SMSFs, with 77% of SMSF investors citing this as a reason for using ETFs, followed by access to overseas markets (65%) and low cost (53%).

The average ETF investor is getting younger

The average age of an ETF investor is 46 years old, down from 51 years old in 2013. About 29% of ETF investors are millennials, compared with 19% five years ago. This trend towards younger investors will be a big part of the ETF growth story in the future.

Source: BetaShares/Investment Trends ETF Report, 2019

Use of ETFs by financial advisers continues to rise

Financial advisers are adopting ETFs in increasing numbers, with more than half of all advisers (53%) now recommend ETFs, and a further 16% intending to use ETFs within the next year.

Number of financial advisers using ETFs in Australia

Source: BetaShares/Investment Trends ETF Report, 2019

51% of financial advisers agreed that the use of ETFs has been of financial benefit to their clients, while 45% said that using ETFs had enabled them to service more clients. However, there is scope for more growth through advice as only 21% of investors say a financial adviser was involved in their most recent decision to invest in ETFs.

We believe that the Royal Commission could have a positive impact on the ETF industry, with financial advisers likely to favour lower cost, transparent products.

Increased interest in responsible investing

The latest study found an increased focus on responsible investing by ETF investors. The market cap of ESG-oriented ETFs grew by a factor of 10 over the last four years, from $77 million in 2015 to $844 million in 2018. One in three ETF investors has already applied the concept of ESG in their investing over the last 12 months, while 25% of financial advisers have expressed interest in more education on socially responsible investing. Our two 'Sustainability Leaders' ETFs, ASX codes ETHI and FAIR, received over $250 million of inflows over the course of 2018.

 

Source: BetaShares/Investment Trends ETF Report, 2019

Outlook for the sector

The Report projects a record 437,000 Australians will be invested in ETFs by September 2019, and we project the Australian ETF industry could end 2019 with $50 to $55 billion in funds under management.

 

More than half of all ETF investors rate their understanding of ETFs as average or lower, suggesting efforts to improve investor knowledge may prove rewarding and increase both new and existing investors’ participation.

Two other major trends are worth noting. First, we are seeing an increased adoption of ETF model portfolios, where advisers or ETF providers pre-mix a selection of ETFs in an asset allocation model. Furthermore, while Australian equities remain important, they have been overtaken by global equity ETFs, and a big growth in non-equity ETFs, especially fixed income.

 

 

Ilan Israelstam is Head of Strategy at BetaShares, a sponsor of Cuffelinks. A summary copy of the Report can be accessed here. This article is for general information purposes only and does not address the needs of any individual.

For more articles and papers from BetaShares, please click here.

 


 

Leave a Comment:

     

RELATED ARTICLES

Making a positive impact with thematic investing

November 2020 was an historic month for ETFs

Wirecard shows not all ethical ETFs pass the smell test

banner

Most viewed in recent weeks

10 reasons wealthy homeowners shouldn't receive welfare

The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?

House prices surge but falls are common and coming

We tend to forget that house prices often fall. Direct lending controls are more effective than rate rises because macroprudential limits affect the volume of money for housing leaving business rates untouched.

Survey responses on pension eligibility for wealthy homeowners

The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?

100 Aussies: five charts on who earns, pays and owns

Any policy decision needs to recognise who is affected by a change. It pays to check the data on who pays taxes, who owns assets and who earns the income to ensure an equitable and efficient outcome.

Three good comments from the pension asset test article

With articles on the pensions assets test read about 40,000 times, 3,500 survey responses and thousands of comments, there was a lot of great reader participation. A few comments added extra insights.

The sorry saga of housing affordability and ownership

It is hard to think of any area of widespread public concern where the same policies have been pursued for so long, in the face of such incontrovertible evidence that they have failed to achieve their objectives.

Latest Updates

Strategy

$1 billion and counting: how consultants maximise fees

Despite cutbacks in public service staff, we are spending over a billion dollars a year with five consulting firms. There is little public scrutiny on the value for money. How do consultants decide what to charge?

Investment strategies

Two strong themes and companies that will benefit

There are reasons to believe inflation will stay under control, and although we may see a slowing in the global economy, two companies should benefit from the themes of 'Stable Compounders' and 'Structural Winners'.

Financial planning

Reducing the $5,300 upfront cost of financial advice

Many financial advisers have left the industry because it costs more to produce advice than is charged as an up-front fee. Advisers are valued by those who use them while the unadvised don’t see the need to pay.

Strategy

Many people misunderstand what life expectancy means

Life expectancy numbers are often interpreted as the likely maximum age of a person but that is incorrect. Here are three reasons why the odds are in favor of people outliving life expectancy estimates.

Investment strategies

Slowing global trade not the threat investors fear

Investors ask whether global supply chains were stretched too far and too complex, and following COVID, is globalisation dead? New research suggests the impact on investment returns will not be as great as feared.

Investment strategies

Wealth doesn’t equal wisdom for 'sophisticated' investors

'Sophisticated' investors can be offered securities without the usual disclosure requirements given to everyday investors, but far more people now qualify than was ever intended. Many are far from sophisticated.

Investment strategies

Is the golden era for active fund managers ending?

Most active fund managers are the beneficiaries of a confluence of favourable events. As future strong returns look challenging, passive is rising and new investors do their own thing, a golden age may be closing.

Sponsors

Alliances

© 2021 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.