Australia’s BetaShares has appointed Lyndall James to a newly created role as director of adviser services as the ETF provider takes aim at the growing number of superannuation funds being run by individuals.
James will be responsible for building relationships with financial advisers which have become an important channel for reaching self-managed super funds. There are now over 500,000 SMSFs in Australia with total assets under management of A$416 billion ($390 billion), representing the largest single sector in the market by type of fund.
In a recent survey of ETF providers, BetaShares found that about half of the 70,000 ETF investors in the country were purchasing through self-managed funds, making the sector a significant source of business.
ETFs allow SMSFs to achieve necessary diversification, argues Alex Vynokur, managing director and co-founder of BetaShares.
“It isn’t easy to pick an active fund manager or buy direct securities that will outperform the market, and that’s why ETFs are being viewed as a transparent, liquid and cost efficient solution,” says Vynokur, commenting on James’ appointment.
James has held several senior distribution roles over the years at Van Eyk, OnePath and MLC. She started with BetaShares last week.
“We created the new role to position ourselves in the middle of two significant trends – the increased use of ETFs by self-managed funds and a growing interest by these funds to seek some sort of professional advice,” says Vynokur.
BetaShares was established 2010 and manages 13 ETFs listed on the Australian Securities Exchange covering equities, currencies, commodities and fixed income. The company is 50% owned by Korea's Mirae Asset Global Investment Group following an acquisition in July 2011.
Vynokur says financial advisers have become a key focus for ETF providers since the introduction of new rules in July designed to improve the quality of financial advice in Australia. Known as the Future of Financial Advice (Fofa) reforms, they are aimed at reducing product fees, removing commission-based incentives and ridding the industry of rogue advisers.
Aside from banning commissions, the reforms require financial advisers to pass a 'best interests' test for each client, meaning they must gather enough information about a client’s risk profile and needs before suggesting a product. Clients are also now required to opt-in, or renew, their advice agreements every two years if they are paying ongoing fees. Further, Fofa bans the use of non-monetary benefits to financial advisers.
The rewriting of the rule book has shifted the focus to ETFs, says Vynokur. “The best interests duty is making advisers think more carefully about what they suggest for clients and whether actively managed fund products are actually providing the best returns.
In the Australian equities market, for example, active managers have by and large underperformed the index once fees are taken into consideration," he adds. "This makes ETFs a more logical choice.
“Fofa is forcing financial advisers to reconfigure their practices to offer more cost efficient and scalable solutions to clients,” he says.
In an attempt to extol the benefits of ETF investing, BetaShares yesterday launched an education blog that will carry views and opinions on ETF investing.
“We need to educate both the advisor community and SMSF trustees themselves on how ETFs work and how they fit into portfolios,” says Vynokur. “The blog will carry articles covering basic facts about exchange-traded funds, but also more advanced articles on how they can be employed strategically within a portfolio.”
Vynokur says he expects BetaShares to make further hires focused on improving distribution among financial advisers.