betashares/investment trends 2017 exchange traded funds ...€¦ · i) respondents from investment...

BetaShares/Investment Trends2017 Exchange Traded Funds Summary Report

Deep Insights Research Report released: December 2017 Reproduction Prohibited

Copyright 2018 Investment Trends Pty Ltd. BetaShares/Investment Trends 2017 Exchange Traded Funds Report – SUMMARY REPORT. Reproduction prohibited. 2

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Analysis: Mark Johnston, Executive Chairman & FounderMichael Blomfield, CEODr Borhan Uddin, Director of Statistical ResearchRecep III Peker, Research DirectorKing Loong Choi, Senior AnalystMinsoo Park, Analyst

Audience: Current and next wave investors of ETFsFinancial planners

Data collected: August to September 2017

Collection method: Online surveys

Disclaimer


Research methodology

Dynamics and growth of the ETF market

Profile of ETF users

SMSF use of ETFs

Financial planners’ use of ETFs

Recap of key themes

Agenda


Research methodology

The September 2017 Exchange Traded Funds Report is the 9th annual study into the Australian ETF market and is based on two detailed online surveys.

1. The Investor Product and Marketing Needs surveyThis survey was conducted between August and September 2017 among two main groups of investors:

i) Respondents from Investment Trends’ opt-in panel who had taken part in previous investment related researchii) Investors recruited from Investment Trends’ institutional clients, including a diverse range of investor information providers, product

providers, private banks, advice networks, and online brokers

Over 6,000 valid responses were received, including 1,093 respondents who were currently using exchange traded funds (ETFs), with a further 291 next wave ETF investors (who were currently considering, but not yet using ETFs). The maximum sampling error for current ETF investors at the 95% confidence interval (centre of the range) is +/- 3.0%. Analysis of smaller subgroups will have a higher sampling error.

2. The Adviser Product and Marketing Needs survey This was a detailed quantitative survey of financial planners, dealer group managers and RG146 compliant accountants conducted between July and August 2017. The survey was conducted in two phases:

i) Core sample: Invitation emails were sent to planners who had previously participated in Investment Trends’ research. This wassupplemented with invitations sent by Financial Standard and Morningstar to their full databases of financial planners and associated professionals

ii) Additional sample: Once the core sample was completed, a number of individual fund managers, ETF providers, and platform providers also invited planners on their own database to participate. These responses have been utilised where appropriate

Total responses after data cleaning, de-duplication, and validation: n=459 financial planners, including RG146 compliant accountants, and dealer group managers who personally provide advice. The maximum sampling error (centre of the range) at the 95% confidence interval for this sample is +/-4.5%.

Where appropriate, respondents were post weighted slightly to remove any sampling bias and ensure correct distribution by main fund manager, deal group channel and preferred platform.

Dynamics and growth of the ETF market


ETF assets and investor numbers continue to grow. September 2017 saw ETF

investor numbers reach 314,000, up 18% from September 2016

0

5

10

15

20

25

30

35

40

Market capitalisation of ETFs ($bn)

ETF market size

10k 19k38k

53k 60k 69k

103k

146k

202k

265k 314k

381k

ETF market size

10k 19k38k

53k 60k 69k

103k

146k

202k

265k

315k

ETF market size

Number of ETF investors

Number of ETF investors – projected outcome

Projection^

Projection for 2018

Projection in previous study

Ma

rke

t c

ap

itali

sa

tio

no

f E

TF

s (

in $

bn

s)

^Note: Projected figures based on Investment Trends modelling. Note that actual outcomes will be influenced by a range of factors, but particularly share market performance. Sourced from Investment Trends 2017 ETF Report.


ETFs play a more prominent role in the investment portfolio as investors gain more

experience using these products

28%33%

28%

7%

9%13%

6%

8%5%

28%

25%

23%

4%

7%

5%

7%

4%

5%

17%10%

12%

3% 4%9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Less than 2 years ago[n=326]

2 to 4 years ago[n=211]

More than 4 years ago[n=219]

Other investments

Cash & cashproducts

Term deposits

LICs

Property (residential,commercial & REITs)

Managed funds(excluding ETFs)

ETFs

Direct shares(outside of managedfunds)

Asset allocation - Proportion of total assets invested in each asset classBy Q111 When did you first start investing in ETFs? Among current ETF investors


The majority of investments into ETFs represent new money into the industry

31%

8%

16%

60%

Direct shares

Managed funds

Cash & TDs

Nothing, incremental investment

What investments did current ETF investors reduce usage in order to invest in ETFs?(proporting citing each)

70%

31%

19%

Direct shares

Managed funds

Cash & TDs

What would current ETF investors have invested in, were ETFs not available?(proportion citing each)

26%

5%

25%

55%

Direct shares

Managed funds

Cash & TDs

Nothing, incremental investment

What investments do next wave ETF investors plan to sell down to invest in ETFs?(proportion citing each)


Just under a third of next wave investors are millennials

29,000 31,00048,000

70,000

108,000136,000

179,000 176,000

38,00050,000

54,000

79,000

84,000

110,000

107,000 125,000

Millennials, 35,000

Non-millennials,90,000

2010[n=2545]

2011[n=2966]

2012[n=2744]

2013[n=6152]

2014[n=6733]

2015[n=6733]

2016[n=6390]

2017[n=4376]

2017[n=4376]

Next wave ETF investors

Re-investors

Investors planning to invest in ETFs in the next 12 months

Profile of ETF users


Just over one in four ETF investors are currently retired, with the typical ETF investor

being 49 years old

Profile of current ETF investors:

Just over one in four are retired

49 years old, on average

33% invest in ETFs via an SMSF

56% intend to re-invest in ETFs in the next year


Younger investors are embracing ETFs

1.1 1.1 0.8

0.7 0.6 0.3

Average

age

% investing in

ETFs via

an SMSF

% investable

assets (as a multiple

of the average ETF

investor)

33%

43%

31%

22%17%

9%

56 5246 50

43 42

> 5 years ago[n=121]

4 - 5 years ago[n=74]




< 1 year ago[n=133]

Profile of current ETF investorsBy When investors first started investing in ETFs


Interest in ETFs is higher among Millennial investors

38%

32%

27%

0%

10%

20%

30%

40%

50%

60%

70%

Millennials Gen X Baby boomers

Proportion of online investors who currently use or intend to use ETFs in the coming year

Source: Investment Trends 2017 Australian Online Broking Report

SMSF use of ETFs


Use of ETFs among SMSFs and non-SMSFs continues to grow strongly

^Source: Investment Trends SMSF Investor Reports

21k 19k 24k39k 45k

53k 59k 60k 66k 69k82k

103k120k

146k

181k

202k220k

265k

285k

314k

11k 10k12k 20k 23k 27k 31k 30k 32k 33k 38k 46k 54k 63k 76k 83k 90k 100k 103k 105k

0

50

100

150

200

250

300

350

ETF market size among SMSFs

Number of investors holding ETFs (inc. SMSFs)

Number of SMSFs holding ETFs (via their SMSF)

51% 50% 50% 51% 51% 51% 52%49% 49% 48% 46% 45% 45% 43% 42% 41% 41%

38% 38%33%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% of ETF investors holding ETFs via their SMSF

51% 50% 50% 51% 51% 51% 52%49% 49% 48% 46% 45% 45% 43% 42% 41% 41%

38% 38%33%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% of ETF investors holding ETFs via their SMSF


Diversification, cost and access to overseas markets are the top drivers of investing

in ETFs among SMSFs and regular investors. SMSF investors are more likely to also

value the liquidity ETFs provide

72%

60%

54%

29%

38%

25%

26%

18%

20%

18%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Diversification

Low cost

Access to overseas markets

Avoiding risk through individual stock exposure

Liquidity/easy to buy and sell

Access to specific types of investments

Access to specific sectors

Provide a good core of investment portfolio

Easier to access than unlisted managed funds

Trading flexibilityAll current ETF investors [n=620]

SMSFs who use ETFs [n=191]

Q113 Why do you use ETFs? (Multiple responses permitted) SMSFs who hold ETFs versus Current ETF investors (Top 10 reasons shown)

Financial planners’ use of ETFs


Seven out of ten planners currently recommend ETFs or intend to do so in the future

15%25% 27%

31% 28%33%

40% 44% 43% 45%17%

19%

27% 16% 19%17%

19%20%

16% 14%

15%

11%

9%

12% 10%11%

9%

9%10% 9%

53%46%

38% 41% 43% 40%32%

27%31% 32%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008[n=487]

2009[n=305]

2010[n=561]

2011[n=635]

2012[n=486]

2013[n=466]

2014[n=442]

2015[n=417]

2016[n=381]

2017[n=359]

Don't intend torecommend ETFs

Don't currentlyrecommend, but mayafter 12 months

Don't currentlyrecommend, but maywithin 12 months

Currently recommendETFs

Q50 Have you used ETFs or active ETFs for your client investments? Among financial planners

47% 55% 62% 59% 57% 60% 68% 73% 69% 68%

Currently recommend/

intend to recommend:


The 7,800 planners currently advising on ETFs represent 79% of planners who

invested new client money in direct equities over the past year

45%

62%

79%

0%

20%

40%

60%

80%

100%

120%

Of all planners Of planners who areaccredited to advise

on direct listedequities

Of planners whoinvested new clientmoney into direct

listed equities over2017

2,200

3,5003,800

4,5004,000

4,800

7,000

7,600 7,5007,800

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Planners currently advising on ETFs

In 2017, this represents:


Planners who currently recommend ETFs typically invest 17% of new client money

through ETFs (steady). They see this increasing to 20% by 2020

7%

9%

13%

17% 17%

20%

4%5%

6% 6%7%

10%

2013 2014 2015 2016 2017 2020 (E)

Average % of inflows in ETFs among planners who recommend ETFs [n=97]

Average % of inflows in ETFs among all planners [n=401]

Q13 In the last year, roughly what proportion of the new client inflows you advised on went into ETFs? & Q14 What do you think these figures will be in 3 years' time? Averages among financial planners

(E) = Planners’ estimates for three years’ time


Planners who recommend ETFs cite low cost as the top reason for using ETFs, while

diversification is the stand out driver among ETF investors

23%

53%

27%

72%

57%

51%

53%

56%

76%

91%

100% 80% 60% 40% 20% 0% 20% 40% 60% 80% 100%

Low cost

Diversification

Liquidity/easy to sell

Access to specific overseas markets

Access to specific types of investments/asset classes

Planners who recommend ETFs [n=190] - RHS Current ETF investors [n=620] - LHS

Top 5 reasons for using ETFs Current ETF investors versus Planners who recommend ETFs

Note: Background represents 2016 results

Current ETF investors [n=620] - LHS Planners who recommend ETFs [n=190] - RHS


There is significant opportunity for advisers to be more involved in ETF investments

38k53k

60k69k

103k

146k

202k

265k

314k

7k 15k 17k 18k 27k 39k 49k 57k71k

2009 2010 2011 2012 2013 2014 2015 2016 2017

No. of ETF investors

No. of ETF investors saying an adviser played a role in their most recent ETF investment

Involvement of advisers in most recent ETF investment

18% 29% 29% 27% 26% 27% 24% 21% 23%

% saying an adviser

played a role in most

recent ETF inv.:


Have used & intend to continue doing so, 45%

Haven't used, but may within

12 months, 14%

Haven't used, but may after 12 months, 9%

Haven't used & don't intend to do so, 27%

$2

$3

$4

$5

$6

$7

$8

$30 $35 $40 $45 $50 $55 $60 $65 $70

Ave

rag

e l

eve

l o

f n

ew

in

flo

ws

($

m)

Average funds under advice ($m)

Q50 Have you used ETFs or active ETFs for your client investments? By Average FUA and new inflows (Bubble size represents proportion of planners in each category)

Among financial planners [n=359]

2017

2016

Planners who currently recommend ETFs typically have a higher level of funds under

advice and higher inflows


Retail ETF investor numbers continue to rise rapidly despite headwinds posed by market conditions

ETFs’ ability to provide low cost, diversified solutions are being embraced by investors across the wealth spectrum, from lower balance investors to SMSFs. Usage by millennial investors is expected to be a significant driver of future ETF growth

Seven in ten planners currently recommend ETFs or intend to do so in the future. Planners who do recommend ETFs continue to allocate larger inflows into the product and plan to continue this growth

There is significant opportunity for advisers to be more involved in ETF investments. Only one in eight investors say a planner was involved in their most recent decision to invest in ETFs

Key themes


BetaShares is a leading manager of ETFs and other Funds that are traded on the Australian Securities Exchange (‘ASX’). BetaShares aim is to provide intelligent investment solutions, which help Australian investors meet their financial objectives.

With a broad range of products now trading on the ASX, our range of Funds is one of the largest and most diverse available in the market. We offer investors simple to use and cost-effective access to equities, cash, currencies, commodities and alternative strategies. As at February 2018, BetaShares manages approximately $5.1 billion in assets.

BetaShares is a member of the Mirae Asset Global Investments Group, one of Asia’s largest asset management firms. As at November 2017, Mirae manages over US$122 billion globally.

About BetaShares


Investment Trends is a specialist research organisation

which provides new business insights and decision

support information to many of the world’s leading

financial services organisations. We combine analytical

rigour and strategic thinking with the most advanced

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clients gain competitive advantage.

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