New Research from Fidelity® and BlackRock Reveals a Key to Growth for ETF Adoption is Educating Investors on ETF Basics

  • ETF Industry Grows at Record Pace, Even Though Two-Thirds of U.S. Investors Don’t Own ETFs
  • Greater Awareness, Further Education Are Powerful Drivers To Increasing ETF Adoption Among Investors and Advisors
  • Current ETF Owners Increasingly Turning to ETFs for Long-Term Holdings
  • Eight in 10 See Benefit in Combining ETFs and Mutual Funds in a Portfolio

BOSTON & NEW YORK--()--While the exchange traded fund (ETF) industry continues to grow at a record pace, with more than $2 trillion in assets in the United States1, less than one-third (32 percent) of individual investors currently own ETFs in their portfolio. What’s holding some investors back? According to a new study from Fidelity Investments and BlackRock (NYSE: BLK) of more than 1,000 individual investors, 61 percent of non-owners report they have not invested in ETFs because of a lack of general familiarity with the products.

The study indicates the momentum of ETF usage should continue to build, especially as awareness of the product’s benefits and features increases. Consider:

  • Forty-six percent of current ETF owners plan to increase their ETF investments in the next three years.
  • One in five non-owners plans to purchase their first ETF in the coming year.
  • Younger investors (ages 25 to 49) are far more likely to use ETFs in their portfolios. Nearly one-third (30 percent) of younger non-ETF owners plan to purchase ETFs in the next 12 months (versus 18 percent for those over age 50).
  • Eighty-eight percent of investors say they use ETFs as part of their long-term investing purposes.
  • Nearly three-quarters of financial advisors (72 percent) expect to increase their ETF allocation in the coming three years, with a quarter expecting to significantly increase their allocation to ETFs.

“While ETF investments have more than doubled in the last five years , there is still significant opportunity to raise awareness as more than two-thirds of investors report they have yet to tap the potential benefits of ETFs in their portfolios,” said Andrew Brownsword, SVP Fidelity retail brokerage. “ETF adoption will keep growing.”

Greater Awareness, Further Education Expected to Increase ETF Adoption

The survey results strongly suggest a key to unlocking this growth is to further educate investors about ETF basics and the benefits of the product. When asked what kind of information they lack about ETFs, non-owners overwhelmingly named:

  • How to evaluate ETFs (55 percent)
  • The benefits of ETFs (51 percent)
  • How ETFs work (49 percent)

“There is plenty of information about ETFs currently available, but what this research tells us is there is still a significant opportunity to help with the basics,” said Jennifer Grancio, Managing Director and head of BlackRock’s alliance with Fidelity Investments. “BlackRock is committed to making investing simpler, easier and more efficient and this includes working with Fidelity to help all types of investors feel confident using ETFs for their long-term investment goals.”

Although Financial Advisors Have Embraced ETFs, They Welcome More Education

The desire for education isn’t isolated to investors. The study shows that most advisors are leveraging ETFs, with 75 percent currently using them in client portfolios. Still, 76 percent want to learn more. The No. 1 type of education advisors seek: what specific ETFs are most appropriate for their clients' investing goals? Additionally, a significant group of advisors are looking for more information on the benefits of ETFs and when they’re appropriate to include in a client’s portfolio, as opposed to when a mutual fund might be more appropriate.

Investors and Financial Advisors Increasingly Adopting ETFs in Their Portfolios for Core, Long-Term Holdings

According to the research, 88 percent of investors think of ETFs as being part of their long-term investing strategies. Seventy-nine percent of advisors using ETFs in client portfolios see them as part of a long-term investing strategy, and 43 percent are using ETFs at the core of their portfolios.

Additionally, 79 percent of ETF non-owners who are likely to purchase ETFs in the coming year say they will purchase them with cash holdings or new money rather than sell off existing holdings.

“Increasingly, investors are realizing the benefits of marrying both ETFs and mutual funds in their portfolios to meet their investing goals, debunking the myth that it’s an either/or proposition,” said Brownsword. “In fact, 82 percent of current ETF owners see a benefit to combining both ETFs and mutual funds in a portfolio.”

ETF Education and Resources Available

For investors looking for more information about ETFs, Fidelity offers an array of free ETF research and education on Fidelity.com, including its online Learning Center, which features more than 70 ETF lessons divided into beginner, intermediate and advanced content, and are available in a variety of formats, including webinars, articles and videos. The three most popular ETF lessons in the past year were all in the beginner level: “What Are ETFs,” “Primer of ETF Valuation” and “The Benefits of ETFs.” In addition, a recent Viewpoints article called “ETFs for 2015” provides a helpful “how-to” guide for exploring the world of ETFs.

Fidelity also offers an ETF research center for financial advisors, which features educational content on ETFs from Fidelity and BlackRock, and search/screening tools that allow advisors to search for ETFs by either pre-defined criteria (e.g., region, sector, asset class) or by their own customized criteria, and easily navigate to a list of screened ETFs within the desired category.

In addition, BlackRock recently launched a new About ETFs section of www.iShares.com with user-friendly content and videos dedicated to helping investors understand benefits of ETFs.

About the Study

GfK conducted interviews with a total of 1,015 investor and 251 advisors. To qualify, investors had to be 25 years old or older, have investable assets of at least $100,000, be an investment decision-maker, and not delegate all decisions to an investment professional. Advisors had to provide clients with investment advice, work directly or on a team with retail clients and personally manage at least $25MM in assets. Interviewing took place July 17 - July 31, 2014.

About Fidelity Investments

Fidelity’s goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. With assets under administration of $5.2 trillion, including managed assets of $2.1 trillion as of Feb. 28, 2015, we focus on meeting the unique needs of a diverse set of customers: helping more than 24 million people investing their own life savings, nearly 20,000 businesses to manage their employee benefit programs, as well as providing nearly 10,000 advisors and brokers with technology solutions to invest their own clients’ money. Privately held for nearly 70 years, Fidelity employs 41,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit www.fidelity.com.

About BlackRock

BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At December 31, 2014, BlackRock’s AUM was $4.652 trillion. BlackRock helps clients meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares® (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. Headquartered in New York City, as of December 31, 2014, the firm had approximately 12,200 employees in more than 30 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company’s website at www.blackrock.com | Twitter: @blackrock_news | Blog: www.blackrockblog.com | LinkedIn: www.linkedin.com/company/blackrock

About iShares

iShares is a global leader in exchange-traded funds (ETFs), with more than a decade of expertise and commitment to individual and institutional investors of all sizes. With over 700 funds globally across multiple asset classes and strategies and more than $1 trillion in assets under management as of December 31, 2014, iShares helps clients around the world build the core of their portfolios, meet specific investment goals and implement market views. iShares funds are powered by the expert portfolio and risk management of BlackRock, trusted to manage more money than any other investment firm.

Investing involves risk, including risk of loss.

ETFs are subject to market fluctuations of their underlying investments and may trade at a discount to NAV.

ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.

Fidelity, Fidelity Investments, Fidelity Investments and the pyramid logo, and WealthCentral are registered service marks of FMR LLC.

BlackRock and iShares are registered trademarks of BlackRock, Inc. and its affiliates.

The third party trademarks appearing herein are the property of their respective owners.

Fidelity Brokerage Services LLC, Member NYSE, SIPC
900 Salem Street, Smithfield, RI 02917

Fidelity Family Office Services is a division of Fidelity Brokerage Services LLC. Fidelity Capital Markets is a division of National Financial Services LLC.

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Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI 02917

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© 2015 FMR LLC. All rights reserved.
© 2015 BlackRock. All rights reserved.

1 Source: BlackRock ETP Landscape – February 2015

Contacts

Fidelity Investments
Corporate Communications, 617-563-5800
Follow us on Twitter @FidelityNews
or
Robert Beauregard, 401-292-7440
Robert.Beauregard@fmr.com
or
Joseph Madden, 401-292-6330
Joseph.Madden@fmr.com
or
BlackRock
Diane Henry, 415-670-4567
Diane.Henry@blackrock.com
Follow us on Twitter @BlackRock_News

Release Summary

Fidelity and BlackRock team up to survey 1,000 investors and 250 advisors about their thoughts on ETFs.

Contacts

Fidelity Investments
Corporate Communications, 617-563-5800
Follow us on Twitter @FidelityNews
or
Robert Beauregard, 401-292-7440
Robert.Beauregard@fmr.com
or
Joseph Madden, 401-292-6330
Joseph.Madden@fmr.com
or
BlackRock
Diane Henry, 415-670-4567
Diane.Henry@blackrock.com
Follow us on Twitter @BlackRock_News