Financial professionals are bullish on exchange-traded funds. An overwhelming majority are including these vehicles in client portfolios, according to a study released Monday by the Financial Planning Association and the Journal of Financial Planning.
According to a survey performed for the study, called “2024 Trends in Investing,” more than 89% of advisors are using or are recommending that clients include ETFs in their portfolios, which is nearly equivalent to the response in 2023.
It's the No. 1 investment vehicle selected by advisors. Cash and cash equivalents are the second most used investments, named by 81% of advisors surveyed.
More than 60% of respondents said they plan to increase their use or recommendation of ETFs over the next 12 months, while less than 2% plan to decrease their use of ETFs, according to the annual study, which this year included 208 advisors.
ETFs and cash were followed by non-wrap mutual funds, individual stocks, and individual bonds as the financial vehicles of choice for advisors.
More advisors said they are now using cryptocurrencies in clients’ portfolios. The percentage is still small, but it has doubled year over year, with 4.8% of advisors saying they now use crypto while only 2.6% did last year.
An overwhelming majority of advisors thought a combination of active and passive investments yielded the best results, with nearly three-fourths preferring a blend of the management strategies. Only some 20% said they use just one strategy or the other.
Clients are still concerned about the economy, and by extension their investments, the study found. Their concerns revolve around interest rates, inflation and the general volatility impacting their portfolios.
Some fundamentals do not change: The survey revealed that life insurance remains a staple of clients’ financial plans. More than a quarter of advisors reported that they had received client inquiries about premium costs and found clients confused about products' designs or benefits. They said term life insurance was the most used product, and that there was a strong demand for long-term care benefits.
Given the confusion, professionals can seize an opportunity to help clients better understand life insurance products and their role in portfolios, the study said.
In a statement, Lee Baker, the practitioner editor of the Journal of Financial Planning reminded readers of the old saying "May you live in interesting times" and said the sentiment especially holds true in 2024.
"With everything going on," Baker said, "consumers need trusted financial planners more than ever.”