Trends In Investing Survey: 2016 Where Financial Advisers Are Investing Now by Financial Planning Association

Executive Summary

As an investment vehicle that advisers use and recommend, exchange-traded funds continue to surpass mutual funds in popularity, according to a recent survey conducted by the Journal of Financial Planning and the FPA Research and Practice InstituteTM.

The 2016 Trends in Investing Survey showed that 83 percent of financial advisers surveyed currently use or recommend ETFs with their clients—the most popular investment vehicle among 18 options. Eighty percent of advisers surveyed currently use or recommend mutual funds (non-wrap) with clients.

FPA’s Trends in Investing Survey has shown continued growth in the popularity of ETFs since 2006, when just 40 percent of survey participants indicated they used or recommended them. This percentage grew to 44 percent in 2008, and to 79 percent in 2014 (when mutual funds still reigned with 82 percent of advisers reporting the used/recommended them). In 2015, ETFs surpassed mutual funds for the first time in the survey’s history, with 81 percent of advisers reporting they used or recommended ETFs with clients, compared to 78 percent who did so with mutual funds. The 2016 survey confirms the popularity of ETFs and their place as the investment product of choice among advisers.

The 2016 survey, which was fielded in April and received 283 online responses, also indicated that 46 percent of advisers plan to increase their use or recommendation of ETFs with clients over the next 12 months. No other investment vehicle showed this level of anticipated increased usage. For example, 23 percent of respondents plan to increase their use of individual stocks, and 21 percent plan to increase their use of mutual fund wrap programs.

Advisers surveyed are turning to ETFs primarily because of their lower costs and tax efficiency over mutual funds, the 2016 survey reveals. The majority of advisers also cite trading flexibility as one of the most significant advantages of ETFs.

The 2016 Trends in Investing Survey also showed that advisers continue to be moving away from variable annuities, with 39 percent currently using/recommending variable annuities, compared to 49 percent in 2012, and a high of 58 percent in both 2006 and 2008.

2016 Trends in Investing Survey

Investments Used

Which investment vehicles do you currently use/recommend with your clients?

Trends In Investing Survey Financial Advisers

Which investment vehicles do you expect to increase your use/recommendation of over the next 12 months?

Trends In Investing Survey Financial Advisers

Which investment vehicles do you expect to decrease your use/recommendation of over the next 12 months?

Trends In Investing Survey Financial Advisers

Which investment vehicles do you currently use/recommend with clients?

Trends In Investing Survey Financial Advisers

Economic Outlook

Trends In Investing Survey Financial Advisers

Key Finding: Advisers’ long-term economic outlook is much more positive than their short-term outlook.

The majority (64 percent) of advisers are “bullish” for the next five years, compared to just 26 percent “bullish” (indicating a 1 or 2 on the scale) over the next six months.

Key Finding: ETFs Remain Most Popular Investment Vehicle among Advisers

When asked about the investment vehicles they currently use or recommend with clients, financial planning professionals have indicated a continued preference for exchange-traded funds.

The 2016 FPA Trends in Investing Survey, conducted by the Journal of Financial Planning and the FPA Research and Practice InsitutiteTM, found that 83 percent of financial advisers surveyed currently use or recommend ETFs with their clients—the most popular investment vehicle among 18 options—followed closely by mutual funds (non-wrap), which 80 percent of advisers surveyed currently use or recommend. Since its inception in 2006, FPA’s annual Trends in Investing survey has shown a growing interest in ETFs, and just last year ETFs surpassed mutual funds as the investment product most commonly used.

This year’s survey, which was fielded in April and received 283 online responses from FPA members, also indicated that 46 percent of respondents plan to increase their use or recommendation of ETFs over the next 12 months. Twenty-six percent of respondents do not plan to increase their use or recommendation of any particular investment vehicle, meanwhile, 23 percent of respondents plan to use or recommend more individual stocks in client portfolios over the next year.

Trends In Investing Survey Financial Advisers

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