Defaqto says exchange-traded funds will grow in popularity after the RDR, but platforms will be key to their success.
A study by the research firm shows that 21 out of 27 wraps and platforms it considered allow investments in ETFs and the products are available on 102 out of 111 pure Sipps it analysed.
Defaqto says advisers will have to consider ETFs if they want to remain independent and the increased competition post-RDR will make low-cost options attractive.
Defaqto senior consultant Adrian Gaspar says: “With continued investor frustration at the performance of active funds and increased usage by fund managers and discretionary fund managers, it is clear that ETFs are here to stay and will continue to grow assets under management in the UK.”
But Tim Page, director of PageRussell, says: “ETFs are competing against institutionally-priced passive funds on platforms, with the additional disadvantage that many platforms charge additional stockbrokers’ fees for ETF trades and do not aggregate trades, which would reduce the costs. So for most portfolios sizes below £200,000 ETFs are at a cost disadvantage and I suspect advisers will opt for passive funds instead.”