Last year the Australian exchange-traded fund segment grew more than 30 per cent in AUM to reach AUD6.5bn. This year alone it is up a further 10 per cent and ETF Consulting’s prediction is for ETFs to grow to more than AUD17bn by 2015.
As at December there were 95 funds from nine issuers across six asset classes.
These forecasts are detailed in a report due for release next week. “How to join the ETF r(e)volution – (and why the Semmelweis reflex is crumbling), outlines ways financial services can participate in this accelerating segment. It provides key statistics, analysis and insights to enable more informed decision making on ETFs. It demonstrates the various ways to participate in the ETF revolution, other than simply as an issuer.
Tim Bradbury, managing director of ETF Consulting, says: “These AUM growth numbers reflect the shifting landscape in financial advice in Australia as well as quantify key milestones for a maturing ETF/ ETP segment.
“The recent and forecast growth is supported by a range of factors including, unbundling of advice services and fees, regulatory change/ FOFA, increasing ETF knowledge, a continued shift ‘on exchange’, as well as the pending wave of accountants looking to provide SMSF solutions to their clients.
“There are many ways for financial services firms to participate in and profit from the ETF boom. However people often mistakenly think that they need to be an issuer to make money from ETFs. In fact there are many opportunities for advisers, fund managers, brokers and platforms all to join in the ETF revolution.”
The regular question of why has the ETF market been slow to take-off is a common one but Bradbury cites several reasons why it appears to have been slow from a low base.
“The slow take-up of ETFs in Australia has been hindered due to several factors including: Limited product, asset class, issuer choice in the first five years; Advice business models biased towards active funds and commission-related remuneration structures; the Global Financial Crisis (GFC) in 2008 which dramatically slowed momentum, and: The Semmelweis reflex – the reflex-like tendency to reject new evidence or new knowledge because it contradicts established norms, beliefs or paradigms (Wikipedia).
“Anyone should be excited to be in a business and segment which is growing at 30-40 per cent pa for the foreseeable future.”
