- ETF Industry Grows at Record Pace, Even
Though Two-Thirds of U.S. Investors Don’t Own ETFs
- Greater Awareness, Further Education
Are Powerful Drivers To Increasing ETF Adoption Among Investors and
Advisors
- Current ETF Owners Increasingly Turning
to ETFs for Long-Term Holdings
- Eight in 10 See Benefit in Combining
ETFs and Mutual Funds in a Portfolio
While the exchange traded fund (ETF) industry continues to grow
at a record pace, with more than $2 trillion in assets in the
United States1, less than one-third (32 percent) of individual
investors currently own ETFs in their portfolio. What’s holding
some investors back? According to a new study from Fidelity
Investments and BlackRock (NYSE: BLK) of more than 1,000 individual
investors, 61 percent of non-owners report they have not invested
in ETFs because of a lack of general familiarity with the
products.
The study indicates the momentum of ETF usage should continue to
build, especially as awareness of the product’s benefits and
features increases. Consider:
- Forty-six percent of current ETF owners
plan to increase their ETF investments in the next three
years.
- One in five non-owners plans to
purchase their first ETF in the coming year.
- Younger investors (ages 25 to 49) are
far more likely to use ETFs in their portfolios. Nearly one-third
(30 percent) of younger non-ETF owners plan to purchase ETFs in the
next 12 months (versus 18 percent for those over age 50).
- Eighty-eight percent of investors say
they use ETFs as part of their long-term investing purposes.
- Nearly three-quarters of financial
advisors (72 percent) expect to increase their ETF allocation in
the coming three years, with a quarter expecting to significantly
increase their allocation to ETFs.
“While ETF investments have more than doubled in the last five
years , there is still significant opportunity to raise awareness
as more than two-thirds of investors report they have yet to tap
the potential benefits of ETFs in their portfolios,” said Andrew
Brownsword, SVP Fidelity retail brokerage. “ETF adoption will keep
growing.”
Greater Awareness, Further Education Expected to Increase ETF
Adoption
The survey results strongly suggest a key to unlocking this
growth is to further educate investors about ETF basics and the
benefits of the product. When asked what kind of information they
lack about ETFs, non-owners overwhelmingly named:
- How to evaluate ETFs (55 percent)
- The benefits of ETFs (51 percent)
- How ETFs work (49 percent)
“There is plenty of information about ETFs currently available,
but what this research tells us is there is still a significant
opportunity to help with the basics,” said Jennifer Grancio,
Managing Director and head of BlackRock’s alliance with Fidelity
Investments. “BlackRock is committed to making investing simpler,
easier and more efficient and this includes working with Fidelity
to help all types of investors feel confident using ETFs for their
long-term investment goals.”
Although Financial Advisors Have Embraced ETFs, They Welcome
More Education
The desire for education isn’t isolated to investors. The study
shows that most advisors are leveraging ETFs, with 75 percent
currently using them in client portfolios. Still, 76 percent want
to learn more. The No. 1 type of education advisors seek: what
specific ETFs are most appropriate for their clients' investing
goals? Additionally, a significant group of advisors are looking
for more information on the benefits of ETFs and when they’re
appropriate to include in a client’s portfolio, as opposed to when
a mutual fund might be more appropriate.
Investors and Financial Advisors Increasingly Adopting ETFs
in Their Portfolios for Core, Long-Term Holdings
According to the research, 88 percent of investors think of ETFs
as being part of their long-term investing strategies. Seventy-nine
percent of advisors using ETFs in client portfolios see them as
part of a long-term investing strategy, and 43 percent are using
ETFs at the core of their portfolios.
Additionally, 79 percent of ETF non-owners who are likely to
purchase ETFs in the coming year say they will purchase them with
cash holdings or new money rather than sell off existing
holdings.
“Increasingly, investors are realizing the benefits of marrying
both ETFs and mutual funds in their portfolios to meet their
investing goals, debunking the myth that it’s an either/or
proposition,” said Brownsword. “In fact, 82 percent of current ETF
owners see a benefit to combining both ETFs and mutual funds in a
portfolio.”
ETF Education and Resources Available
For investors looking for more information about ETFs, Fidelity
offers an array of free ETF research and education on Fidelity.com,
including its online Learning Center, which features more than 70
ETF lessons divided into beginner, intermediate and advanced
content, and are available in a variety of formats, including
webinars, articles and videos. The three most popular ETF lessons
in the past year were all in the beginner level: “What Are ETFs,”
“Primer of ETF Valuation” and “The Benefits of ETFs.” In addition,
a recent Viewpoints article called “ETFs for 2015” provides a
helpful “how-to” guide for exploring the world of ETFs.
Fidelity also offers an ETF research center for financial
advisors, which features educational content on ETFs from Fidelity
and BlackRock, and search/screening tools that allow advisors to
search for ETFs by either pre-defined criteria (e.g., region,
sector, asset class) or by their own customized criteria, and
easily navigate to a list of screened ETFs within the desired
category.
In addition, BlackRock recently launched a new About ETFs
section of www.iShares.com with user-friendly content and videos
dedicated to helping investors understand benefits of ETFs.
About the Study
GfK conducted interviews with a total of 1,015 investor and 251
advisors. To qualify, investors had to be 25 years old or older,
have investable assets of at least $100,000, be an investment
decision-maker, and not delegate all decisions to an investment
professional. Advisors had to provide clients with investment
advice, work directly or on a team with retail clients and
personally manage at least $25MM in assets. Interviewing took place
July 17 - July 31, 2014.
About Fidelity Investments
Fidelity’s goal is to make financial expertise broadly
accessible and effective in helping people live the lives they
want. With assets under administration of $5.2 trillion, including
managed assets of $2.1 trillion as of Feb. 28, 2015, we focus on
meeting the unique needs of a diverse set of customers: helping
more than 24 million people investing their own life savings,
nearly 20,000 businesses to manage their employee benefit programs,
as well as providing nearly 10,000 advisors and brokers with
technology solutions to invest their own clients’ money. Privately
held for nearly 70 years, Fidelity employs 41,000 associates who
are focused on the long-term success of our customers. For more
information about Fidelity Investments, visit www.fidelity.com.
About BlackRock
BlackRock is a leader in investment management, risk management
and advisory services for institutional and retail clients
worldwide. At December 31, 2014, BlackRock’s AUM was $4.652
trillion. BlackRock helps clients meet their goals and overcome
challenges with a range of products that include separate accounts,
mutual funds, iShares® (exchange-traded funds), and other pooled
investment vehicles. BlackRock also offers risk management,
advisory and enterprise investment system services to a broad base
of institutional investors through BlackRock Solutions®.
Headquartered in New York City, as of December 31, 2014, the firm
had approximately 12,200 employees in more than 30 countries and a
major presence in key global markets, including North and South
America, Europe, Asia, Australia and the Middle East and Africa.
For additional information, please visit the Company’s website at
www.blackrock.com | Twitter: @blackrock_news | Blog:
www.blackrockblog.com | LinkedIn:
www.linkedin.com/company/blackrock
About iShares
iShares is a global leader in exchange-traded funds (ETFs), with
more than a decade of expertise and commitment to individual and
institutional investors of all sizes. With over 700 funds globally
across multiple asset classes and strategies and more than $1
trillion in assets under management as of December 31, 2014,
iShares helps clients around the world build the core of their
portfolios, meet specific investment goals and implement market
views. iShares funds are powered by the expert portfolio and risk
management of BlackRock, trusted to manage more money than any
other investment firm.
Investing involves risk, including risk of
loss.
ETFs are subject to market fluctuations of
their underlying investments and may trade at a discount to
NAV.
ETFs are subject to market fluctuation and the risks of their
underlying investments. ETFs are subject to management fees and
other expenses. Unlike mutual funds, ETF shares are bought and sold
at market price, which may be higher or lower than their NAV, and
are not individually redeemed from the fund.
Fidelity, Fidelity Investments, Fidelity
Investments and the pyramid logo, and WealthCentral are registered
service marks of FMR LLC.
BlackRock and iShares are registered trademarks
of BlackRock, Inc. and its affiliates.
The third party trademarks appearing herein are
the property of their respective owners.
Fidelity Brokerage Services LLC, Member NYSE,
SIPC900 Salem Street, Smithfield, RI 02917
Fidelity Family Office Services is a division
of Fidelity Brokerage Services LLC. Fidelity Capital Markets is a
division of National Financial Services LLC.
Fidelity Clearing and Custody provides
clearing, custody, or other brokerage services through National
Financial Services LLC or Fidelity Brokerage Services LLC, Members
NYSE, SIPC. 200 Seaport Blvd, Boston, MA 02210
Fidelity Investments Institutional Services
Company, Inc., 500 Salem Street, Smithfield, RI 02917
718420.1.0© 2015 FMR LLC. All rights reserved.© 2015 BlackRock.
All rights reserved.
1 Source: BlackRock ETP Landscape – February 2015
Fidelity InvestmentsCorporate Communications,
617-563-5800Follow us on Twitter @FidelityNewsorRobert Beauregard,
401-292-7440Robert.Beauregard@fmr.comorJoseph Madden,
401-292-6330Joseph.Madden@fmr.comorBlackRockDiane Henry,
415-670-4567Diane.Henry@blackrock.comFollow us on Twitter
@BlackRock_News
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