The exchange-traded fund industry in the U.S. has gone from zero to more than $2 trillion in assets in a little more than two decades . . . not bad, considering retail investors have pretty much sat out the ride.
According to a survey released today by Fidelity Investments and BlackRock, just 32 percent of individual investors include ETFs in their portfolios. That’s because 61 percent of non-owners said they lack a general familiarity with these investment vehicles.
Specifically, in each of the following areas roughly half of non-owners said they didn’t know how to evaluate ETFs, didn’t know their benefits and didn’t know how they work.
The survey of 1,015 individual investors and 251 financial advisors found younger investors ages 25 to 49 are far more likely to include ETFs in their portfolios, while 30 percent of younger non-owners plan to buy an ETF during the next 12 months versus 18 percent of non-owners older than age 50.
According to Fidelity and BlackRock, one of the big bugaboos regarding ETF adoption by retail investors centers on education—or a lack thereof. And, say the companies, even financial advisors seek more information in areas such as selecting specific ETFs that best fit client goals, as well as when ETFs might be a better choice than mutual funds.
That said, the survey found 75 percent of financial advisors use ETFs in client portfolios and 72 percent said they expect to boost their ETF allocation during the next three years, while a quarter of advisors plan to significantly expand their allocations.
Fidelity and BlackRock have forged a partnership on the ETF front in recent years, with Fidelity featuring 70 of BlackRock’s iShares funds on its investment platform; BlackRock serving as sub-advisor to Fidelity’s 11 sector ETFs; and iShares funds playing a starring role in the BlackRock Diversified Income Portfolio, an ETF-heavy managed account offered to Fidelity brokerage customers.
As part of their joint survey, both companies touted the ETF education tools found on their respective websites.