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Fad fears over too much choice

Too much choice in the ETF market could be dangerous and lead to fad investing.

At a Money Marketing round table on ETFs, Evolve Finan- cial Planning director James Norton said providers need to take a responsible approach to new launches. He said: “Choice is great for the professional investors but there is a risk for the private investor that they are a kid in a candy shop. They see everything out there and they want it and there is a risk that it turns into fad investing. ETF providers need to be responsible in terms of launching the right products at the right time.”

Hargreaves Lansdown investment manager Ben Yearsley agreed, saying: “You are providing much more choice and making it much more difficult for the average IFA. Do you think they know what they are buying? I don’t think half of them do.”

Db x-trackers UK head Manooj Mistry said: “We want to offer a broad range and offer the building blocks, it is not a question of launching something because it’s a hot sector but we want to give people choice.”

Seven Investment Management director Justin Urquhart Stewart said: “The plain ETFs have been relatively straightforward but I fear the industry is already getting itself far too complicated.”

Barclays Global Investors global head of ETF research & implementation strategy Deborah Fuhr said that transparency from providers about what they are selling is important but brokers also need to understand the products.

She said: “It is a case of making sure that whoever is talking to the end client really understands the product and tells them what it is, that’s the challenge.”

City Asset Management investment director David Wilcox said: “If the market evolves, you are just increasing the range of options for IFAs rather than limiting them and they have got the opp-ortunity to educate themselves.”


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