ETFs
Advisors Choose ETFs Over Stocks for Client Portfolios: Survey
Nearly 90% of respondents to an FPA survey recommend exchange-traded funds to their clients.
Financial advisors continue to favor exchange-traded funds for their clients’ portfolios and plan to increase their use of ETFs, according to research from the Financial Planning Association and the Journal of Financial Planning.
The survey, released this week, also reveals that customers are concerned that high interest rates and inflation will hamper their portfolios.
More than 89% of advisors who responded to the Investment Trends Survey 2024 currently use or recommend ETFs, and more than 60% plan to increase their use of ETFs over the next 12 months, reflecting a strong preference for this investment vehicle. Less than 2% indicated they planned to reduce the use of ETFs, the FPA said.
Among other findings, the survey found that a hybrid approach to active or passive management “continues to significantly outperform” proponents of either strategy.
The survey, conducted March 4 to April 3, collected 208 responses from financial planners who provide investment services or implement recommendations to clients.
“ETFs continue to dominate investment portfolios, both for current and future allocations. Indeed, investment managers appear to be reorganizing concentrations without making major changes, as the top five vehicles in current and future allocations are largely the same,” the investigative report said.
While ETFs topped the list, the percentage of advisors favoring them declined by less than a percentage point from 2023. Planners slightly increased their use of individual stocks and bonds.
“In general, investment professionals feel more optimistic about the economy in the near term than last year, while their outlook becomes slightly dimmer for the next two to five years. Their clients are concerned about interest rates, inflation and general volatility weighing on their portfolios,” the report said.
The survey asked financial planners which investment vehicles they use or recommend to their clients. The top 10 products were:
- ETF — 89.42%
- Cash and equivalents — 81.25%
- Mutual funds (non-wrap) — 68.27%
- Individual stocks — 53.37%
- Individual bonds — 50%
- Separately managed accounts – 36.06%
- ESG funds — 34.62%
- Variable annuities — 30.77%
- Fixed annuities — 29.81%
- Mutual fund integration programs — 29.81%
The survey also found that life insurance remains a fundamental part of customers’ financial plans, with more than a quarter of respondents saying they had received inquiries from customers regarding the cost of premiums and confusion over the design or benefits of the products.
Term life insurance appears to be the most used product (74%), according to the survey, which also reveals strong demand for long-term care benefits. More than 40% of professionals use or recommend service-related long-term care insurance to their clients.
Although most professionals are confident in their approach to using or recommending life insurance products, some advisors have reported difficulty informing clients about product features and identifying appropriate coverage.
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