Advisers turn to ETFs as Gen Z interest grows

Exchange Traded Funds (ETFs) make up almost half (49.2%) of all buy trades made by advisers for Generation Z (aged between 18-24) investors, up by five percentage points since 2022, with demand for the asset class surging among all age groups, new research has revealed.

Overall, nearly a third (30.9%) of buying volumes from advisers was directed to ETFs through 2023, up from around a quarter of 2022 volumes, according to data from wholesale trading platform AUSIEX.

For those aged between 25-49, ETFs made up 24.7% of the buying volumes from advisers in 2023.

According to AUSIEX’s Brett Grant, who heads the firm’s product, marketing and customer experience teams, the past two years – a period of heightened market uncertainty – have cemented ETF’s place as “an increasingly important part of advisers’ investment strategies”.

Grant recognised three key reasons why ETFs have gained popularity with advisers. For one, they provide “instant diversification” for investors, providing ready exposure to an array of asset classes, investment trends, thematics, and regions. Secondly, they are cost-effective with a typically, particularly compared to traditional managed funds, with fixed a cost structure. And thirdly, they are both “liquid and transparent”, trading like individual stocks, whilst also enabling advisers to make informed investment decisions.

“By taking advantage of ETFs, advisers can construct well-balanced portfolios tailored to the unique risk tolerance and financial goals of their clients.”

ETFs’ growing popularity with younger cohorts also offers advisers “new ways to engage with the next generation of investors”, particularly, Grant said, “considering the types of exposures which can now be achieved with them and how they can be aligned to individual investor values”.

AUSIEX, or the Australian Investment Exchange Limited, specialises in equities execution, clearing and settlement services and equities administration for the wholesale market.