FTSE Russell today confirmed that smart beta strategies are becoming a growing part of the asset allocation schemes of US-, UK- and Canada-based financial advisors. However, implementation of these strategies is still evolving, and advisors are keen to better understand how they can use smart beta to its full potential.
According to a new FTSE Russell advisor survey, 68% to 79% of US-, UK, and Canada based financial advisors are ‘aware’ of smart beta investment strategies but only 35% on average are ‘very familiar’ with them. Although outlook for future use is strong in all three countries, advisors are still skeptical and looking for more information.
As smart beta implementation is still evolving, financial advisors are divided as to whether it compliments active or passive investment strategies. Interestingly, findings indicate a continued evolution of how smart beta is being used. In the UK and Canada, 8 of 10 view smart beta as best sitting alongside active strategies while, in the US, 6 of 10 advisors view smart beta as best sitting along passive strategies.
UK advisers are skeptical as to the benefit, expressing concerns over predictability of performance (35% of non-users) and insufficient track records (32% of non-users). And in the US, 47% of advisors say they “don’t know enough about” smart beta strategies, suggesting an opportunity for continued education.
The diverse outlook markets view these strategies from points to a need for more consistent global education and insight on smart beta index-based strategies. According to Rolf Agather, Managing Director of North America Research, FTSE Russell, “the results of our second smart beta advisory survey show that there is continued and growing popularity of smart beta strategies among retail advisers. There is also a significant opportunity for growth in the wealth market, but more education is needed.”
The outlook for adoption of smart beta strategies is strong in all three countries, with more than half of financial advisers surveyed in the UK and Canada and 40% of those surveyed in the US expecting to increase their usage.
The 2018 FTSE Russell smart beta advisor survey expanded on the 2015 US advisor smart beta survey with input from 256 financial advisors divided almost equally between the US, UK and Canada. These established, full-time, fee-based financial advisors and wealth managers all have more than three years of experience and $25 million in assets under management.
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