Speaking at a media briefing in Sydney on Wednesday, ETF Securities founder Graham Tuckwell said that while Paul Keating did a “fantastic thing” in introducing compulsory superannuation, the safety blanket for Aussie retirement came with a side effect.
“He did a wonderful thing by forcing the money to go in [to super] but unfortunately at the time, they didn't provide a very low-cost way of just getting exposure to the overall equity market,” he said.
“Had that been the case, Australians would have saved hundreds of billions of dollars in fees.”
Given the large amount of money in super and a tradition of running the money through managed funds, Mr Tuckwell argued there’s been a “huge vested interested” in slowing the growth of the ETF sector in Australia.
“Because what are ETFs in a nutshell? They're simply a lower cost way of people getting a spread of investments, generally equity investments but it could be bonds, but that's it in a nutshell.”
However, he said understanding of ETFs is increasing, “thank goodness”.
As it stands, the Australian ETF market is around seven years behind Europe, which was another seven years behind the US, Mr Tuckwell argued.
“The mindset has changed in the last two or three years. It is really going to take off from here. The next five years will see enormous growth,” he said.
Continuing, Mr Tuckwell dismissed as “absolute nonsense” arguments that ETFs were “Armageddon” in terms of volatility.
Earlier this year, the World Economic Forum said ETFs are “yet to be tested in crisis conditions” and could potentially “exacerbate” any major market correction.
To Mr Tuckwell, suggestions that ETFs are “financial weapons of mass destruction”, is overblown.
“All that is happening is people are taking their money away from active fund managers who are charging them a high fee and putting it into a lower-fee product,” he said.