Growth potential for ETFs as investment industry outlines recommendations to broaden access for retail investors

New research from the Investment Association (IA) and Opinium reveals that current demand for Exchange Trade Funds (ETFs) is driven by younger, male and higher income investors, providing opportunities for growth within the wider investor community.

An ETF is a type of investment fund that holds a collection of assets and is traded on a stock exchange. ETFs can enable investors to diversify their portfolios cost-effectively and offer greater liquidity and flexibility through intraday trading.

As more UK adults start investing, our survey suggests that awareness of, and appetite for ETFs amongst younger investors is increasing. However, a lack of knowledge about ETFs is holding back wider adoption, with almost half (49%) of the wider investor base having little to no knowledge of the product. There is a significant opportunity for the industry to help raise awareness of ETFs so that investors can make better informed decisions, and to reach a more diverse profile of investors, including women and the over 55s.

The IA has set out three key recommendations for industry to broaden the ETF investor base, in turn helping to democratise investment and enabling more people across the UK achieve their long-term financial goals:

• Create a targeted investor education programme to explain ETFs and their benefits as part of a long-term investment strategy.
• Improve access for current ETF investors by broadening the range of ETFs available on platforms, lowering investment minimums and clearly communicating dealing costs.
• Engage with advisers to help them understand how ETFs can improve client portfolios.

Miranda Seath, Director of Market Insights at the Investment Association, commented:

"Our latest ETF research highlights the evolving needs of new investors, who increasingly look for real-time access, greater investment choice on digital platforms, and low costs. The success of ETFs to date is a testament to the industry's ability to innovate and meet changing investor expectations. The limited uptake in particular amongst women and older investors highlights a significant growth opportunity. By addressing the barriers to adoption and improving investor and adviser education, we can help more people benefit from the advantages of ETFs and build diversified and resilient portfolios aligned with their long-term financial goals.

“The trends highlighted in this report align with our vision of a modernised, tech-enabled fund industry. Our ambition is to build on the principles set out by the Chancellor in the Leeds Reforms and to increase the proportion of UK adults that invest. By fostering collaboration across the investment industry and with investment platforms, wealth managers and financial advisers, we can make a significant difference in democratising investment and promoting greater understanding of the role of ETFs, as a critical part of the retail investor toolkit.”

Key findings from the research include:

Diversify the ETF investor base through greater education

• The research found that younger, male and higher income investors are currently driving ETF adoption. Over 2 in 5 (41%) ETF investors are aged 18-34, and over two-thirds (68%) are male, notably higher than the 56% of men in the overall investor sample. Those investing in ETFs are also almost twice as likely to be earning over £60,000 (51% vs. 31% of all investors), and nearly half (49%) started investing in the last 5 years.
• Improving education about how ETFs work and their benefits could help broaden and diversify the investor base. Many retail investors do not yet understand what ETFs are or how they fit into a portfolio. Almost half (49%) of UK retail investors say that they have little to no knowledge of ETFs, with uncertainty about performance (25%) and a lack of understanding about how to evaluate or compare products (23%) cited as key reasons holding back would-be investors.

Increase accessibility to boost adoption

• Broadening the range of ETFs available on platforms to enable access to a wider variety of asset classes and themes and lowering the minimum investment level could boost adoption. Over half (55%) of ETF investors said they would increase their ETF holdings if more options were available on their main investment platform, and almost half (48%) said that lower minimum investment levels would encourage them to buy more ETFs.
• Low fees and cost effectiveness (46%), portfolio diversification (46%) and transparency (33%) are all ranked amongst the top reasons for investing in ETFs. Amongst younger investors (aged 18-34 and 35-54) intra-day trading also made the top three (13%). 

 Bring more advisers on board

• Incorporating ETFs into the advice process could offer significant opportunities for advisers, especially as ETFs may appeal more strongly to cost-conscious and younger clients. Financial advisers currently play a limited role in driving ETF usage among retail investors. Only 4% of ETF investors surveyed are fully advised, compared to 10% in the broader investor base. In addition, more than 2 in 5 (43%) advised investors say that their adviser has never recommended an ETF to them.

Notes to Editors

You can read the full report here: Retail Investors and ETFs

The IA’s recommendations for improving retail investor understanding and access to ETFs:

Recommendation 1: Bridging the knowledge gap through investor education: The research shows that a lack of awareness and understanding of Exchange Traded Funds is the single biggest barrier preventing many retail investors from considering ETFs. To address this, the industry should consider a co-ordinated investor education programme with a particular focus on reaching women and older investors who are significantly under-represented amongst ETF investors. This would focus on providing clear, accessible content that explains what ETFs are, how they work and their benefits and risks in simple terms. It is important to emphasise to investors that ETFs can be used for prudent, long-term investing just like mutual funds. ETFs can be core holdings in ISAs and pensions aimed at retirement or other long-term goals.

Recommendation 2: Improving access for ETF investors: Our survey suggests that there are a number of ways that investment platforms, financial advisers, wealth managers and ETF providers could work together to level the playing field and improve retail investor access and choice to help remove barriers to increasing investor take up. This includes:

• Broadening the range of ETFs available on platform to enable access to a wider variety of asset classes and themes.
• Lower investment minimums: allowing investors to invest small amounts and build positions gradually. This approach appeals to younger investors or those testing the waters.
• Dealing costs and accessibility: ETF investors are cost-conscious and our research indicates that higher fees for buying ETFs are a potential barrier to greater adoption. Whilst the dealing fee is a commercial decision for investment platforms, the findings do underscore the importance of clear sign-posting as investors want to compare dealing fees as well as fund charges.

Recommendation 3: Adviser engagement: The research suggests that advisers are not routinely recommending or discussing ETFs and this may also be linked to lack of confidence or knowledge (or indeed interest). As an industry, we can do more to help facilitate adviser training and continue to provide educational content for financial advisers about ETFs covering how they work, how to evaluate them and portfolio construction using ETFs. We can address any lingering scepticism by sharing research and case studies that demonstrate where ETFs are effective.

The research suggests that there is also an opportunity to engage advisers by looking at how integrating ETFs could benefit their clients:

• Cost efficiency: Advisers can use ETFs to build cost-efficient portfolios across both active and passive investment strategies as a greater range of active ETFs are launched. ETFs also settle faster than mutual funds, meaning less time out of the market.
• Meeting client demand: As more clients (especially younger ones) ask about ETFs or even come in with existing ETF holdings, advisers should be prepared to discuss and manage ETFs.
• Hybrid advice models: As the landscape evolves, advisers may increase intergenerational financial planning or give clients self-serve options for portions of their portfolio. If advisers pursue these models, ETFs are likely to feature more prominently in fund selection on the platforms that advisers choose to integrate with.

Underpinning all three recommendations is the importance of emphasising a focus on long-term investing: Across all communications (whether to DIY investors or via advisers), we should stress that ETFs can and should be used for prudent, long-term investment strategies.

About the research

The IA, in partnership with Opinium, surveyed 2000 investors with at least £500 in investible assets on attitudes to investing and knowledge of ETFs.

We surveyed investors between 24 and 31 March 2025: 

• Our analysis centres on a comparison between ETF investors and investors that do not hold ETFs.
• We also, where relevant, compare responses by age group: 18-34, 35-54 and 55+.