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ETF expert looks to provide research for financial advisers


As the adoption of exchange-traded funds continues to grow rapidly among financial planners, accountants and brokers, the need for relevant research to support the advice process needs to be tailored for ETFs.

ETF Consulting and Portfolio Solutions founder Tim Bradbury says: “We are being asked again to provide research on ETFs to assist financial advisers. To meet this demand we are re-considering offering ETF specific research.
“In the same way that ETFs are disruptive technology in investing, we believe the research and validation process for recommending ETFs is in need of a shake-up too.”
Dealers and advisers need professional but appropriate information about ETFs.
The dominant research model in Australia is clearly open to conflicts which are difficult, if not impossible, to manage. Of course it depends on the business model but when an ETF issuer (or any fund manager) is charged substantial amounts of money by the research house to rate their product, it has the potential to create poor “optics” within the industry. This has also been identified by the regulator in its Regulatory Guide 79.
Whilst most dealer groups have between two and five research house relationships, in ETF Consulting’s view many have a methodology for assessing ETFs which is either too complex or too difficult to understand. Trying to "shoe horn" research on an ETF into a process designed to assess actively managed investment strategies is part of the problem causing excessive complexity and cost.
Bradbury believes there are ways to provide expert research to advisers and dealer groups without the conflicts and excessive costs and his business intends to re-visit plans to provide this to financial advisers and dealer groups.
"ETFs will continue to grow rapidly as they have in many developed financial services markets, Australia is no different,” says Bradbury. ”We are being told by advisers that increasingly their clients are asking questions about ETFs so advice channels and dealers need to be armed with the necessary information, education and compliance tools.
“If we consider there is a commercial business case, we will look to work with our existing Business Partners to provide a range of comprehensive, compliant and relevant research solutions covering. In addition our ETF accreditation program for advisers will support this initiative to assist dealers and advisers in meeting the knowledge and proficiency tests for ETFs.”
The ETF segment continues to grow and has risen 10 per cent in the first four months of 2014, to pass through AUD11 billion in the 91 exchange traded products available in the ASX. It is now possible for advisers and investors to build comprehensive portfolios using ETFs, often in conjunction with active managed funds and direct shares.

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