Bluerating | April 2023

From Cinderella to Princess: this is the trajectory of the the ascent of ETFs in Italy. There are many reasons for their success – ETFs are efficient, cost-effective tools which blend well with the most advanced consultancy models.

FINER has conducted a survey commissioned by Vanguard on 8.500 financial professionals – financial advisors (FAs), private bankers (PBs) and bank managers. The survey has been presented at Consulentia 2023 and offers some food for thought. 

The level of knowledge of passively managed funds and ETFs shows room for improvement: 34% of bakers, 25% of PBs and 16% of FAs claim to know little about them.

FAs, generally the most inclined to suggest ETFs (68%), follow PBs (44%) and bank managers (34%).

All financial professionals agree in saying that, when it comes to selecting passively managed funds, the awareness and reputation of the issuer and the value of the brand take precedence over replication methods and knowledge of the indices.

Clearly, as any other asset class, for ETFs and passively managed funds, the market is led by the supply. In fact, very few clients demand them: 34% demand them to FAs, 23% to PBs and 9% to bank managers.

According to financial professionals, the group of clients who requests ETFs and passively managed funds is quite heterogeneous (from affluent clients to HNWIs) and coherent with different professional figures.

The age of clients requiring ETFs is also quite heterogeneous, with a prevalence for younger clients (under 40): 69% for bank managers, 57% for FAs and 52% for PBs.

All professionals involved in the survey agree on the increased importance of ETFs over the last years: 69% for FAs, 67% for PBs and 62% for bank managers.

There is also a widespread willingness to employing ETFs in the next 12 months: 71% for FAs, 69% for PBs and 66% for bank managers.

It is also interesting to understand whether ETFs can coexist alone or together with other tools within an existing portfolio. The answer is unequivocal: everyone would prefer for ETFs to be included in a consultancy service (89% for FAs, 87% for PBs and 78% for bank managers).

It is also relevant to analyze what could contribute to spreading the use of passively managed funds and ETFs: the partnership with an issuer led centrally by the bank is the most relevant aspect for bank managers (66%), PBs (53%) and financial advisors (42%).

The tools for building the portfolio (25% for FAs, 19% for PBs and 12% for bankers) and training activities led by issuers (22% for PBs, 17% for bankers and 14% for FAs) are also very important factors.

Among the driving forces for the growth of ETFs, fee-based and hybrid consultancy models are quite relevant for FAs.

The possible removal of (very much discussed) inducements is not, at the moment, a meaningful driver for the growth of ETFs in Italy, as evidenced by their current presence also within the most advanced consultancy models.

Of course, the quick evolution of financial consultancy will hasten some changes in the relationship with AMCs: a relationship more and more aimed at quality and efficiency and thus highly selective.

In this context, ETFs will have an increasingly important role also in Italy.

Nicola Ronchetti