As the folk poet Bob Dylan says, the times they are a changing. Mutual funds had been king of the investment hill for a very long time now, but they just got knocked off their throne this year. According to the 2015 Trends in Investing Survey, exchange-traded funds (ETFs) are now the most popular investment vehicle that financial advisers use and recommend.
The 2015 Trends in Investing Survey was undertaken by the Journal of Financial Planning and the FPA Research and Practice Institute in March of 2015, and the sample comprised 303 online financial adviser responses.
Details on the 2015 Trends in Investing Survey
The 2015 Trends in Investing Survey highlights that 81% of financial advisers surveyed currently use or recommend ETFs with their clients, making it the most commonly used investment vehicle from the 17 choices.
The popularity of ETFs
The popularity of ETFs has continued to grow over the years. Back in the 2006 Trends Survey, only 40% of survey participants indicated they used or recommended ETFs. The number rose to 44% by 2008, and then when ETFs started to really catch on, the percentage zoomed to 79% in 2014.
The 2015 survey also showed that 51% of advisers plan to increase use of ETFs with clients over the next year. ETFs had the highest level anticipated increased usage. For comparison purposes, 23% of respondents said they plan to increase their use of mutual fund wrap programs, and 22% will boost their use of individual stocks.
Of interest, the survey reports that only 22% of financial advisers have used smart beta ETFs with clients over the last 12 months. However, when asked how their use/recommendation of smart beta ETFs has changed over the last year, 14% of advisers noted that it has increased.
Of note, around 78% of financial advisers currently use or recommend non-wrap mutual funds with their clients. That is a 4% decline from the 82% who recommended mutual funds in 2014.
Finally, the 2015 Trends in Investing Survey highlights that financial advisers are moving away from annuities, with only 38% using/recommending variable annuities, compared to 41% doing so in 2014. These figures are down from a high of 58% in both 2006 and 2008. Moreover, just 28% of financial advising professionals report they are currently using/recommending fixed annuities with their clients, slipping from 29% last year and a high of 49% just five years ago.
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