IFAs are expected to drive further growth in European ETF sector
European ETF provider, Source, expects to see a significant increase in demand for ETFs from retail investors, predominantly driven by independent financial advisers (IFAs).  Research conducted by Source showed that 18% of IFAs have seen clients increase exposure to ETFs over the past year, with 34% expecting clients to invest more in the funds. 59% states that lower charges gi﻿ve ETFs an advantage over other investment funds.

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Demand for exchange-traded funds in Europe has traditionally come from institutional investors, but European ETF provider Source is forecasting a significant increase in demand from retail investors, primarily through their independent financial advisers.

Research conducted by the London-headquartered firm reveals that nearly one in five (18%) IFAs say their clients have increased their exposure to ETFs over the past 12 months, as opposed to 3% who have seen clients reduce it.

Over the next year, one in three (34%) IFAs expects clients to increase their exposure to ETFs compared to 4% of IFAs who anticipate exposure will fall.

Some 59% of IFAs say that lower charges give ETFs an advantage over other investment funds, and this was followed by 21% who said it was about innovation, and 13% who cited the wide choice of ETFs available.

Source has seen a 20% increase in assets under management so far this year (as of 15 September 2015), attracting $3.4 billion in net new assets. The increase has been seen across asset classes with $1.8bn into fixed income ETFs, $1.3 billion into equity ETFs and $300m into commodity products.

“We are delighted by the strong inflows we have seen into our ETFs, but our research shows that the UK and European market has huge potential for further growth. In a poll of more than 100 IFAs in the UK, 14% of them said they do not fully understand ETFs, and 34% said that their clients do not fully understand them,” said Lee Kranefuss, Chairman of Source.

Data from the London Stock Exchange shows the broader ETF industry is in good health and continues to innovate and release products in response to investor demand. “London has long been seen as the capital of the ETF industry in Europe, with deep liquidity and a strong emphasis on promoting transparency. In 2015, 101 new ETFs and 25 new ETPs listed on the LSE. Total on-exchange value traded for ETFs this year is up 61% compared to the same period last year,” said Gillian Walmsley, Head of Listed Products at the LSE.

The optimistic outlook for the industry has prompted Source to launch a multi-million pound advertising and marketing campaign. “We hope that our new advertising campaign will help raise our profile amongst financial advisers. We have also enhanced the educational material on our website to help IFAs improve their understanding.” added Kranefuss.