The results of a recent study showed the ETF industry just how much room it has to grow. Cogent Reports, the syndicated division of Market Strategies International, aimed to get a better grip on who owns ETFs and their results exposed that 55% of ETF owners make up only 37% of affluent Americans. That’s a lot of rich money that has yet to adopt the ballooning investment vehicle.
Millennials – unsurprisingly as they are more likely to be early-adopters – led all generations, with nearly four in ten reporting they own an ETF. Gen X investors followed not far behind with one in five saying they owned ETFs. The drop off follows those two younger generations as 2nd Wave Boomers, 1st Wave Boomers, and Silent Generation investors owned ETFs only 14%, 12% and 11% of the time, respectively.
These results are encouraging for issuers with older clients in their base as they clearly have affluent clients whose investment dollars are untapped by their ETF products. Where things got really interesting is the distribution of age range by provider. Some issuers are doing much better courting that “older money” than others.
It makes sense. The brands that have been along longer and have established credibility tout older mean age of ownership. State Street SPDRs were the first ETFs available and a familiar name for all investors and iShares, BlackRock’s ETF brand, not only has established cred by having the most assets under management, but its influence is tied to more affluent investors through its many investment vehicles.
When you look at a brand like First Trust they are more niche and actively managed, a young man’s game. Ambitious attempts to beat the market with aggressive strategies are a hallmark of younger investors throughout time. That hasn’t changed with ETFs.
The concerning thing for the big players who have a more well-distributed balance of demographics is the Gen Xers and Millennials are coming into their peak earning years. As investors more well-versed in ETFs control more off the money these issuers will jockey for their dollars and having familiarity with them will be essential. Julia Johnston-Ketterer, author of the report and senior director at Market Strategies said, “…looking to the future, companies who do the best job connecting with younger investors who embrace ETFs are the firms that will likely to see the most growth.”