ETFs help meet best interest test

Market Vectors believes these types of indexing securities will help advisers meet the new rules under FOFA.

“We believe that an ETF is the investment product that can provide all of the above requirements for an adviser and their client as they look to satisfy the best interest test [and] make sure they can do their due diligence,” Arian Neiron, managing director of Market Vectors Australia, told ifa.

The firm believes it is because of the distinct characteristics of ETF products.

“They [advisors] have a liquid investment that they can trade on the ASX throughout the day; there is full transparency to the underlying holdings,” Mr Neiron stated.

“I believe as time passes and the industry develops that will be the standard of what clients and financial advisers will require from financial products.”

Mr Neiron said although the ETF market in Australia is in an “embryonic phase,” FOFA changes, MySuper and growth in SMSFs all lead to a “structural story” that will grow the market.

More broadly the firm sees ETFs providing an “innovative solution” for many clients needs.

They provide clients with the ability to have transparent, liquid and diversified investments, which is “the crux of the ETF value proposition,” Mr Neiron said.

The company, which has an index business in Frankfurt called Market Vectors Index Solutions (MVIS) that creates indexes for ETF clients, is set to expand what is on offer to the Australian market.

“The ETFs we will be launching will be purpose built ETFs...and all ETFs we will be doing will be AUD denominated,” Mr Neiron said.