Exchange traded fund (ETF) provider iShares recently conducted a survey of affluent investors and found that, overall, they’re none too pleased with the fund industry. That’s lead to low levels of trust.

But ETFs come out of the survey smelling like a rose. iShares reports that ETF users have significantly higher confidence scores than non-ETF users when it comes to understanding the impact of fees and the tax implications of funds they own.

The survey targeted individuals who had at least $500K in assets (excluding employer-sponsored retirement plans and real estate), have mutual funds in their portfolios and are at least 22 years of age.

Some of the findings:

• 81% believe that the fund industry should put investors’ needs first
• 32% are satisfied that the industry is actually doing that
• 88% feel that the fees are unclear; 77% feel the tax implications are unclear

Among the 16% of survey respondents who use ETFs:

• 81% understand how the financial markets work
• 68% love managing their investments
• 87% understand how fees impact their returns
• 89% pay attention to diversification

Could it be that the strong numbers here are a result of the many benefits ETFs have over the old school mutual funds? Namely, instant diversification, transparency, lower fees and ease of use.

Among the 84% of respondents who don’t use ETFs, there was a lower level of understanding how the financial markets work, less love for managing investments, less understanding of fees and less attention paid to diversification.

The survey affirms what we discovered when we conducted our own survey: smart people like ETFs. 42.4% of our readers have graduate degrees, and 38% possess bachelor’s degrees.

ETF Trends’ readers love ETFs, too: 55.1% have at least 25% of their portfolios dedicated to ETFs. 83.8% plan to use ETFs even more in 2008 than they currently do.

Tags: Retirement