Lack of education stunting UK retail ETF adoption

Apr 25th, 2022 | By | Category: ETF and Index News

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Only one in five (22%) retail investors in the UK currently invest in ETFs or ETPs, according to a survey commissioned by WisdomTree.

Adria Beso, Head of Platforms Distribution, Sales, Europe, WisdomTree

Adria Beso, Head of Platforms Distribution, Sales, Europe, WisdomTree.

The proportion of UK retail investors adopting ETFs remains significantly below other investment avenues with nearly half (47%) of those surveyed investing in single stocks and shares and a third in open-ended funds (33%) or investment trusts (32%).

The low uptake of ETFs amongst UK retail investors stands in contrast to the growth of the European ETF industry which has seen its assets increase by approximately 180% over the past five years to reach more than $1.6 trillion at the end of 2021.

Lack of education was cited as the main barrier to investing in ETFs with a third (34%) of non-ETF UK retail investors indicating they did not understand the vehicle, while a fifth (19%) had never even heard of them.

As a result, 35% of UK retail investors said they would be interested in receiving education about ETFs from their investment platform and online broker.

The research also found that, of the 18–34-year-olds who invest in ETFs, over half (54%) said they do so because ETFs are easy to understand, suggesting that the industry stands to grow significantly once there is wider awareness in the UK market.

The opportunity may be sizable too as those who do currently use ETFs tend to invest more than a third (36%) of their capital in them on average, while a quarter (23%) of respondents hold over half of their investments in them.

Adria Beso, Head of Platforms Distribution, Sales, Europe, WisdomTree, said: “Despite the large growth in demand for ETFs and ETPs by professional investors, uptake has been slower in the retail market, and particularly in the UK when compared with other European countries like Germany. Confidence in knowing how and why to invest in ETFs and ETPs is low, leading to a lack of investment despite the fact they are easily traded, offer diversification and more transparency, and are low cost, all of which are important in the current economic backdrop.”

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