As reported by FT.com, retail investors in the UK are rapidly wrapping their arms around ETF products, and platform providers are ramping up their offerings to facilitate the burgeoning growth in what is already a ubiquitous product in the US.
According to the FT.com story, David Bower, head of iShares UK, said the ETF industry would be a major beneficiary of RDR which will ban commission payments to financial advisers from the beginning of 2013. ETFs, unlike many other investment funds, do not pay commissions to advisers.
Mr Bower said the strong growth that iShares saw on wrap platforms in 2011 suggested that ETF usage amongst financial advisers and discretionary fund managers would continue to rise.
BlackRock saw assets held in iShares ETFs across six wrap platforms used by IFAs increase 34 per cent in 2011 to £746m at the end of December.
The six platforms are run by Ascentric, Novia, Nucleus, Raymond James, Standard Life and Transact.
Novia saw assets held in iShares ETFs increase 96 per cent last year while Ascentric reported an 88 per cent rise.
Paul Boston, sales and marketing director at Novia, said that ETFs were playing an increasingly important role in both advisory and discretionary portfolios on the Novia platform.
“This is proving to be a well-trodden investment strategy that significantly reduces the overall cost of a client’s portfolio,” Mr Boston said.
Further affirming this trend, UK-based institutional broker North Square Blue Oak (NSBO) has recently aligned with US-based ETF market expert WallachBeth Capital to form WallachBeth International, whose role, according to NSBO principal Laurie Pinto, “will include servicing institutional portfolio managers as well as leading wrap account administrators in the course of their securing best execution in a market place that is still catching up to the level of transparency that is available for US-centric ETF products.”
Added Pinto, whose firm is headquartered in London with an affiliate office in Beijing, “We certainly expect the demand for ETF products in the European market will emulate the growth trajectory which the US market has experienced over the past several years. To the extent that we can introduce best practices for true best execution, we believe we’ll be adding significant value to institutions that are utilizing these products.”