The Spotify moment for the financial services industry
Younger investors are flocking to ETFs at a time Michael Blomfield from Investment Trends aptly calls "a Spotify moment for the financial services industry".
Millennials represented just 12% of the Aussie ETF market five years ago. That number has skyrocketed to 43% within the last two years. Similarly, the average age for a first time ETF investor today is 42, down from 56 more than five years ago.
Some of this can be attributed to ageing. Millennials now represent more of the Australian population than before, with more disposable income.
But it also reflects the rising appeal of ETFs as an investment product, now growing 18% year on year.
ETFs used to be the domain of self-managed super fund (SMSFs) trustees, typically older Australians.
While this group has by no means turned off them - the number of SMSFs using ETFs is up 12% from last year - they have been joined by the broader investment community.
The move of ETFs into the mainstream can also be seen in the increasing number of financial advisers who advise on them - 3,800 in 2010 vs 10,500 today.
Moreover, advisers now allocate double the investment dollars into ETFs than they used to.
"The use of ETFs can significantly reduce the time an adviser spends on constructing client portfolios, freeing them up to maintain existing and gain new client relationships," says Betashares CEO Alex Vynokur.
Investors are increasingly using ETFs to gain exposure to defensive asset classes, with 40% of ETF investors increasing their defensive positions over the past year.
"We have seen significant growth in our cash and fixed income offerings, with investors seeking out income-oriented exposures with defensive and diversification benefits, which have been particularly relevant in the current low interest rate environment," says Vynokur.