A strategic set of ETF model portfolios that target accumulator clients and help advisers offer low-cost solutions have just been launched.
Lonsec Stockbroking, a dealer group research unit, saw the need for a platform that advisers and investors can use to tap into the growing appeal of exchange traded funds (ETFs) in a low cost and diversified model.
It has just launched five portfolios across five different risk profiles, from defensive to high growth. The portfolios provide investors access to a balanced portfolio, covering Australian equities, international equities, property securities, fixed interest, and cash.
Lonsec’s investment adviser Geoff Beeston told Wealth Professional
the models are some of the first on the Australian market and are in anticipation of the explosion of ETF demand, which has doubled in the past two years, reaching $10 billion.
“For the financial planner it offers an opportunity for them to tap into accumulated SMSF
s. We’ve spoken to advisers and come up with something that helps them get into the lower balanced market,” he said.
This is because the turnovers of the portfolios will be very low, and the administration costs for advisers will be less than a direct share portfolio Beeston said, adding that the portfolio will be reported on quarterly and reviewed twice yearly.
“For [advisers’] clients it’s extremely cost effective. The cheapest is 14 basis points, which I would say is one of the most cost effective types of these models on the market,” he said.
The portfolios also offer opportunities for diversification and the ETFs cover more than 6,000 equities worldwide over 48 different exchanges.
Beeston said Australian advisers and investors should be doing more to understand and tap into the ETF market by educating themselves about aspects such as taxation and custodianship.
“From my own observations, the use of ETFs is still quite piecemeal - we haven’t seen a holistic approach to using them across the entire strategic investment allocation,” he said. “I see [the ETF] space developing further in the accumulation market. I think large dealerships are looking at how to access this space in a cost-effective way.”