Exchange traded funds (ETFs) continue to experience significant growth and innovation. We expect that continued advances in digital technologies will significantly impact ETF sponsors, service providers and other participants.
We foresee technological change driving significant impacts upon ETF operations, distribution and products. These changes will also impact a firm’s profit margins, regulatory risks, cyber security, and customer interactions. There is no question that successful firms will need to evolve rapidly to keep ahead of their competition.
Almost every familiar aspect of the ETF industry is likely to be made over by the unprecedented onslaught of automation in the future. In fact, among our survey respondents, 35% expect that the investment advisor operations function will be the most disrupted by the technological shift, as ever-expanding advances in data analytics and machine learning enable computers to sift through more information faster, resulting in more precise decision-making.
We expect that ETFs will continue to drive transparency and comparability, especially in the plain vanilla index replication market. Market participants compete principally on price making efficient operations crucial. We agree with the survey respondents that digital technologies are and will continue to drive significant efficiencies in asset management operations.
PwC surveyed executives from approximately 60 firms around the world using a combination of structured questionnaires and in-depth interviews. More than two-thirds of the participants were ETF managers or sponsors, with the remaining participants divided between asset managers not currently offering ETFs and service providers. Participating firms account for more than 80% of global ETF assets.
This paper leverages the results of our ETF global survey and includes our insights on how the ETF industry will be impacted by FinTech over the next few years.
PwC’s experience in the ETF market can help your business deal with constant innovation and disruption. We offer seamless integration of our audit, tax and advisory services combined with deep knowledge and experience addressing unique tax positions and structural issues facing ETF sponsors, service providers and other participants.
Asset and Wealth Management Leader, PwC US
Global ETF Practice Leader, Global Financial Services Innovation Center, PwC US
Mutual Funds Leader, PwC US