ETFs are the latest big thing in the investment world across Japan, Europe and America, but in Taiwan, the product isn’t getting much support as the market is currently dominated by mutual funds, says one of the panellists at The Asset ETF Asia Summit 2015 held in Taipei, Taiwan in July.

According to Darren Hsu, associate vice president at FuhHwa Securities Investment Trust: “there seems to be a lack of education about ETFs across Taiwan as the market is still mainly driven by mutual funds. This is because financial advisors on the island are familiar with how they (mutual funds) work, and banks continue to distribute them heavily through their financial advisors.”

Hsu says incentives are offered advisors that push popular products to clients. “Also, banks’ infrastructure are structured to handle mutual funds, and most of them have not changed their systems to work with ETFs yet,” Hsu says during the summit’s session, The ETF Distribution Challenge.

Hsu echoes the view of the rest of the panel that in order for the investment product to thrive in Taiwan, distribution channels will have to be improved and that measures should be taken to educate the market about ETFs.

Hsu adds that in Taiwan, traditional distributors such as retail banking relationship managers are still the main distributors of ETFs across the island. Online distributors have not started to take hold yet. Knowledge of funds and investment instruments are primarily done through financial advisors, according to Hsu.

He believes that it will take some time for private banks and retail banks in the island to open their online distribution channels for ETFs, due to government support of the mutual fund industry and because of the interest financial advisors and private bankers in maintaining traditional methods of face-to-face interactions with people to distribute funds.

“I don’t see online distribution of funds taking off in Taiwan anytime soon. There are a lot of jobs on the line, and financial advisors and private bankers have incentives for ensuring that their clients go to them to seek financial advice and products,” says John Huang, CEO of Cathay Private Bank.

But Taiwan is due for a change according to Christine Lam, director, regional institutional services, iFast Financial, an online investment platform.

“As people become more sophisticated and want access to global funds with low fees for trading, it is only natural that countries across the Asia Pacific, including Taiwan, will slowly see their ETF distribution channels focus more towards online channels,” says Lam.

Jessica Law, managing director, Hong Kong at Saxo Capital Markets foresees Taiwan’s distribution channels soon changing towards a more sophisticated digital level similar to that of Hong Kong where traditional channels slowly were replaced with more modern ones.

“Online platforms are dominant in developed markets that have sophisticated users who are able to do their own research and buy their own funds. Since Taiwanese investors are becoming sophisticated, I expect this change,” says Law.