Access to Broker Platforms Biggest Distribution Challenge for ETF Issuers, PwC Survey Finds

A recent survey conducted by PwC has found that access to broker platforms is the biggest distribution challenge faced by European ETF issuers. According to the report titled “ETFs 2028: Shaping the Future,” gaining access to platforms is key in developing a strong distribution channel in Europe, and was identified as the number one challenge by the survey respondents.

The survey, which interviewed 70 executives globally, found that 57% saw significant demand coming from retail investors, who are expected to provide the biggest surge in ETF demand in Europe over the next two to three years as issuers look to unlock areas of untapped growth. However, the report also highlights the challenges faced by new entrants to the market, particularly in gaining access to broker-dealer platforms.

The report also predicts that global ETF assets under management (AuM) will exceed $19.2 trillion by June 2028, representing a five-year CAGR of 13.5%, more than double the anticipated 5% CAGR for the asset and wealth management industry as a whole in the five years up to 2027. This growth is expected to be driven by a combination of investor demand, technological advancements, and market innovations.

Key Takeaways

• Access to broker platforms is the biggest distribution challenge faced by European ETF issuers, according to a recent PwC survey.
• Retail investors are expected to provide the biggest surge in ETF demand in Europe over the next two to three years.
• Global ETF assets under management are predicted to exceed $19.2 trillion by June 2028, driven by investor demand, technological advancements, and market innovations.

The State of ETF Market

Exchange-traded funds (ETFs) have been growing at an unprecedented rate in recent years, with the global ETF assets under management (AUM) reaching almost $11.5 trillion at the end of 2023, according to PwC analysis. The ETF market has achieved a remarkable Compound Annual Growth Rate (CAGR) of 18.9% in the past five years, and PwC estimates that global ETF AUM could top $20 trillion by 2026 [1].

Growth and Projections

The growth of the ETF market can be attributed to several factors, such as the low-cost structure, diversification benefits, and ease of trading. The ETF market has also seen a significant increase in the number of participants, with new entrants joining the industry every year.

PwC’s report, titled ETFs 2028: Shaping the future, highlights the potential for growth in the ETF market, with new products and strategies being introduced to meet the evolving needs of investors.

Regional Focus: US and Europe

The US ETF market is the largest in the world, with over $5.5 trillion in AUM, accounting for almost 50% of the global ETF market [2]. The European ETF market is also growing at a rapid pace, with AUM reaching a record high of €1.1 trillion in 2020 [3].

However, European ETF issuers face challenges in gaining access to broker-dealer platforms, which is seen as one of the biggest distribution challenges, according to a survey by PwC [4]. The report, titled ETFs 2028: Shaping the future, states that access to platforms is key in developing a strong distribution channel in Europe.

In conclusion, the ETF market is experiencing rapid growth, with new products and strategies being introduced to meet the evolving needs of investors. The US ETF market remains the largest in the world, while the European ETF market is also growing at a rapid pace, although ETF issuers face challenges in gaining access to broker-dealer platforms.

Challenges in ETF Distribution

Survey Insights by PwC

According to a survey by PwC, gaining access to broker-dealer platforms is one of the biggest distribution challenges for European ETF issuers. The report, titled “ETFs 2028: Shaping the future,” revealed that access to platforms is key in developing a strong distribution channel in Europe and was their number one challenge.

The survey also found that retail investors will provide the biggest surge in ETF demand in Europe over the next two to three years as issuers look to unlock areas of untapped growth. This means that ETF issuers need to focus on advisor engagement, build awareness, and develop a distribution approach to tackle this challenge.

Broker-Dealer Platforms

Broker-dealer platforms are online platforms that allow investors to buy and sell securities. These platforms are essential for ETF issuers as they provide access to a large number of investors. However, gaining access to these platforms is not easy, and ETF issuers need to meet certain criteria to be listed.

One of the biggest challenges for ETF issuers is meeting the criteria for inclusion on these platforms. The criteria often include minimum assets under management, trading volume, and liquidity. ETF issuers also need to have a strong track record and a good reputation to be included on these platforms.

In conclusion, gaining access to broker-dealer platforms is one of the biggest distribution challenges for European ETF issuers. ETF issuers need to focus on advisor engagement, build awareness, and develop a distribution approach to tackle this challenge. They also need to meet the criteria for inclusion on these platforms, which often include minimum assets under management, trading volume, and liquidity.

ETF Issuers and Asset Management

Role of ETF Issuers

ETF issuers play a crucial role in the distribution of ETFs. They are responsible for creating and managing ETFs, and ensuring that they are available to investors. In order to distribute ETFs, issuers need to gain access to broker-dealer platforms. However, according to a recent PwC survey, access to these platforms is one of the biggest distribution challenges faced by European ETF issuers.

To overcome this challenge, ETF issuers need to work closely with asset managers and wealth managers. By partnering with these entities, issuers can gain access to a wider range of distribution channels. Additionally, they can work with model portfolio providers to ensure that their ETFs are included in model portfolios.

Asset Managers’ Perspectives

Asset managers play a critical role in managing the assets under management (AUM) of ETFs. They are responsible for creating investment strategies that are designed to meet the needs of investors. Additionally, they are responsible for ensuring that the ETFs they manage are performing well and are meeting their investment objectives.

According to the PwC survey, asset managers are optimistic about the future of the ETF market. They believe that the market will continue to grow, and that there will be even greater opportunities for ETF issuers in the future. However, they also recognize that there are challenges that need to be overcome in order to achieve this growth.

One of the biggest challenges faced by asset managers is the need to create investment strategies that are tailored to the needs of investors. This requires a deep understanding of investor needs, as well as a deep understanding of the market. Additionally, asset managers need to be able to manage risk effectively, in order to ensure that the ETFs they manage are not exposed to unnecessary risks.

In conclusion, ETF issuers and asset managers play critical roles in the distribution and management of ETFs. While there are challenges that need to be overcome, both entities are optimistic about the future of the ETF market. By working together, they can ensure that ETFs continue to be a popular investment option for investors around the world.

Investor Engagement and Education

Retail Investors and ETF Savings Plans

Retail investors are an essential part of the ETF industry, and ETF issuers must engage with this customer segment to maximize their success. One way to achieve this is through ETF savings plans. These plans allow retail investors to invest small amounts of money over time, making it easier for them to build a diversified portfolio.

According to a survey by PwC, access to broker-dealer platforms is the most significant distribution challenge for ETF issuers. However, by offering ETF savings plans, issuers can bypass this challenge and directly engage with retail investors. This engagement can help ETF issuers build a loyal customer base and increase their assets under management.

The Importance of Investor Education

Investor education is crucial for the success of ETF issuers. Retail investors who are not familiar with ETFs may be hesitant to invest in them. Therefore, it is essential to educate investors about the benefits and risks of investing in ETFs.

Investor education can also help issuers improve the customer experience. By providing investors with the knowledge they need to make informed investment decisions, issuers can build trust and loyalty with their customers.

In conclusion, ETF issuers must prioritize investor engagement and education to maximize their success. By offering ETF savings plans and educating investors about the benefits of ETFs, issuers can build a loyal customer base and improve the customer experience.

Technological Advancements

The ETF industry has been significantly impacted by technological advancements in recent years. The use of artificial intelligence (AI) and machine learning (ML) has enabled ETF issuers to gain deeper insights into investor behavior and preferences. This has helped them to better understand their target audience and tailor their marketing strategies accordingly.

Influence of AI and Machine Learning

AI and ML have revolutionized the investment industry by providing investors with more accurate and timely information about market trends and investment opportunities. ETF issuers are leveraging these technologies to gain a competitive edge in the marketplace. By using predictive analytics, ETF issuers can identify trends and patterns in investor behavior, which helps them to make more informed investment decisions.

Moreover, AI and ML have enabled ETF issuers to automate many of the manual processes involved in managing an ETF. This has resulted in significant cost savings and increased efficiency, which has helped to drive down the cost of ETFs for investors.

Investment Apps and Online Tools

The rise of investment apps and online tools has also had a significant impact on the ETF industry. These platforms have made it easier for investors to access and invest in ETFs, which has helped to drive demand for these products.

Investment apps and online tools have also made it easier for ETF issuers to market their products to a wider audience. By leveraging these platforms, ETF issuers can reach investors who may not have been aware of their products otherwise.

Overall, technological advancements have had a significant impact on the ETF industry. By leveraging AI, ML, investment apps, and online tools, ETF issuers have been able to gain a competitive edge in the marketplace and better serve the needs of their customers.

Market Trends and Innovations

Demand for Active ETFs

The demand for actively managed ETFs has been on the rise in recent years, as investors seek out products that offer the potential for higher returns and more flexibility than traditional passive ETFs. According to a survey by PwC, access to broker-dealer platforms is the biggest distribution challenge for ETF issuers. This is particularly true for active ETFs, which require a more hands-on approach to marketing and distribution.

To meet this demand, many ETF issuers are developing new products and strategies that offer investors more choice and flexibility. One example is the growth of ETF model portfolios, which allow investors to access a range of asset classes and investment styles through a single, diversified portfolio. These model portfolios are becoming increasingly popular with financial advisors and retail investors, as they offer a simple, low-cost way to build a diversified portfolio.

Product Innovation and Business Model Transformation

As the ETF market continues to evolve, issuers are also looking for new ways to differentiate themselves and stay ahead of the competition. One trend that is gaining momentum is product innovation, with issuers launching new ETFs that offer exposure to niche markets and alternative asset classes. For example, some issuers are launching ETFs that track specific sectors, such as technology or healthcare, while others are offering ETFs that invest in commodities or currencies.

In addition to product innovation, many ETF issuers are also undergoing a transformation in their business models, as they seek to adapt to changing market conditions and investor demands. This transformation is driven by a number of factors, including the need to reduce costs, improve operational efficiency, and enhance the customer experience. One example of this is the growing use of technology to automate and streamline the ETF distribution process, making it easier and more cost-effective for issuers to reach investors.

Overall, the ETF market is experiencing significant growth and innovation, as issuers seek to meet the evolving needs of investors and stay ahead of the competition. As the market continues to evolve, it is likely that we will see further product innovation and business model transformation, as issuers look for new ways to differentiate themselves and stay ahead of the curve.

The Role of Banks and Private Institutions

Banks and private institutions play a crucial role in the distribution of ETFs. They act as distribution channels, providing access to a wide range of investors, including private banks and wealth management firms. According to a recent survey by PwC, gaining access to broker-dealer platforms is one of the biggest distribution challenges for European ETF issuers.

Private Banks and Wealth Management

Private banks and wealth management firms are among the key players in the ETF industry. They offer a range of services to their clients, including portfolio management, investment advice, and access to a wide range of investment products, including ETFs. These institutions often have high-net-worth clients who are looking for investment opportunities that offer diversification, liquidity, and transparency.

Bank’s ETF Offerings and Services

Banks play a significant role in the ETF industry by offering their own ETFs and services. They offer a range of services to their clients, including trading, custody, and settlement services. Banks also act as market makers, providing liquidity to the market, and help to create and list new ETFs.

In conclusion, banks and private institutions play a crucial role in the distribution of ETFs. They provide access to a wide range of investors and offer a range of services, including portfolio management, investment advice, and access to a wide range of investment products, including ETFs. However, gaining access to broker-dealer platforms remains a significant challenge for European ETF issuers, according to a recent survey by PwC.

Demographic Shifts and Customer Base

As the ETF industry continues to grow, it is important for issuers to understand the changing demographic of their customer base. A recent survey by PwC found that access to broker platforms is one of the biggest distribution challenges for ETF issuers. In this section, we will explore two key demographic shifts that are affecting the ETF industry: generational wealth transfer and women’s increasing role in investing.

Generational Wealth Transfer

One of the biggest demographic shifts that is currently taking place is the transfer of wealth from Baby Boomers to their children and grandchildren. As this wealth is transferred, there is a growing interest in investing among younger generations, particularly Millennials. According to a report by Charles Schwab, 66% of Millennials say they are interested in investing, compared to just 36% of Baby Boomers.

As younger generations begin to invest, they are looking for investment options that align with their values. ETFs are becoming an increasingly popular choice because they offer exposure to a variety of companies and industries, allowing investors to diversify their portfolios.

Women and ETFs

Another demographic shift that is taking place is the increasing role of women in investing. According to a study by Fidelity, women are becoming more confident in their investment decisions, with 72% saying they are confident in their ability to invest, compared to 65% of men.

Despite this growing confidence, women are still underrepresented in the investing world. ETFs offer a solution to this problem because they are low-cost and easy to trade, making them accessible to investors of all levels.

In conclusion, understanding the changing demographics of the customer base is crucial for ETF issuers to effectively market their products and reach new investors. As younger generations begin to invest and women become more involved in the investing world, ETFs are likely to become an increasingly popular choice.

Global ETF Landscape

Since the first ETF was launched in 1993, the global ETF market has grown exponentially, with assets under management (AuM) reaching $9.7tn as of December 2023, according to etfstream.com. The ETF industry has become increasingly competitive, with providers seeking ways to differentiate themselves and gain market share.

ETFs in Asia and Emerging Markets

The ETF market in Asia and emerging markets has grown rapidly in recent years. According to a survey by PwC, 67% of respondents expect that the ETF market in Asia will grow at a faster rate than the ETF market in the US and Europe over the next five years. BlackRock, the world’s largest ETF provider, has been expanding its presence in Asia, launching new ETFs and partnering with local firms to tap into the growing demand for ETFs in the region.

European Providers and Market Share

In Europe, the ETF market is dominated by a few large providers. BlackRock, Vanguard, and State Street Global Advisors (SSGA) control more than 70% of the European ETF market, according to a report by PwC. However, smaller providers have been gaining market share in recent years, with niche ETFs and smart beta strategies becoming increasingly popular.

One of the biggest challenges for ETF issuers in Europe is gaining access to broker-dealer platforms, which are key in developing a strong distribution channel. According to the same PwC survey, access to platforms was the number one challenge for European ETF issuers. However, the report also found that European ETF issuers are optimistic about the future of the industry, with 86% of respondents expecting the European ETF market to double in size by 2028.

Liquidity and APs

Liquidity is an important consideration for ETF investors, and it is also a key factor for authorized participants (APs), who are responsible for creating and redeeming ETF shares. APs play a crucial role in maintaining the liquidity of ETFs, and the relationship between ETF issuers and APs is an important factor to consider when evaluating an ETF.

Irish Chapter

Ireland is a popular jurisdiction for ETF issuers, with more than 60% of European ETFs domiciled in the country. The Irish Stock Exchange has become a hub for ETF trading, with a number of large ETF issuers choosing to list their products on the exchange.

In conclusion, the global ETF landscape is constantly evolving, with new providers entering the market and existing providers seeking to differentiate themselves. While the industry faces a number of challenges, including gaining access to broker-dealer platforms, the future of the ETF industry looks bright, with strong growth expected in Asia and emerging markets, as well as in Europe.

Frequently Asked Questions

What are the primary distribution challenges faced by ETF issuers according to the PwC survey?

According to the PwC survey, access to broker-dealer platforms is the biggest distribution challenge faced by European ETF issuers. The report titled “ETFs 2028: Shaping the future” revealed that access to platforms is key in developing a strong distribution channel in Europe, and was ranked as the number one challenge.

How do access barriers to broker platforms impact ETF distribution and growth?

Access barriers to broker platforms can have a significant impact on ETF distribution and growth. Broker platforms are critical in providing access to retail investors, and without access to these platforms, ETF issuers may struggle to gain visibility and market share. The PwC report highlights that gaining access to broker-dealer platforms is a significant challenge for ETF issuers, and that without a strong distribution channel, ETF growth may be limited.

What strategies are ETF issuers adopting to overcome platform access hurdles?

ETF issuers are adopting a range of strategies to overcome platform access hurdles. One approach is to work with platform providers to establish partnerships and develop tailored solutions that meet the needs of both parties. Another approach is to focus on building relationships with key distributors, such as financial advisors and wealth managers, who can provide access to their client base. Additionally, some ETF issuers are exploring alternative distribution channels, such as direct-to-consumer platforms and robo-advisors.

What role do regulatory environments play in ETF issuers’ distribution challenges?

Regulatory environments can play a significant role in ETF issuers’ distribution challenges. Different regulatory regimes can lead to variations in distribution practices and requirements, which can create barriers to entry for ETF issuers looking to expand into new markets. The PwC report highlights the need for ETF issuers to navigate a complex regulatory landscape, and to work closely with regulators to ensure compliance with local requirements.

How does the relationship between ETF issuers and broker platforms influence market dynamics?

The relationship between ETF issuers and broker platforms can have a significant impact on market dynamics. Broker platforms play a critical role in providing access to retail investors, and the success of ETF issuers is closely tied to their ability to gain visibility and market share on these platforms. Strong relationships between ETF issuers and platform providers can lead to mutually beneficial outcomes, such as increased product offerings and enhanced distribution capabilities.

What are the implications of distribution challenges on the ETF industry’s future?

The distribution challenges faced by ETF issuers have significant implications for the future of the ETF industry. Without access to strong distribution channels, ETF issuers may struggle to gain visibility and market share, which could limit the growth potential of the industry. However, by adopting innovative distribution strategies and working closely with platform providers and regulators, ETF issuers can overcome these challenges and continue to drive growth in the industry.