First, there was the Pepsi Generation. And now, evidently, there’s the ETF Generation.
According to a new survey from Charles Schwab, 91 percent of millennial investors either “strongly agreed” or “somewhat agreed” when posed the question whether exchange-traded funds are their investment vehicle of choice.
That’s the highest percentage among four different generation cohorts covered in the survey of 1,500 investors ages 25 to 75 years old with at least $25,000 in investable assets, and who’ve bought ETFs in the past two years. Among those 91 percent, 53 percent were in the “strongly agreed” camp. Millennials are defined as people ages 25 to 37.
Eighty percent of Gen Xers (ages 38 to 53) said that ETFs are their investment vehicle of choice, followed by baby boomers (ages 54 to 72) at 54 percent and matures (ages 73 and older) at 30 percent.
The results aren’t surprising, given that ETFs are relatively new products for a new era, and they play a prominent role in the portfolio construction services provided by low-cost digital advice platforms that have been popular with younger investors (and with Gen Xers, too).
The Schwab survey has gobs of stats, including how investors evaluate ETFs. (News flash: low expense ratios and total costs top the list, though a fund’s ability to track an index, an ETF provider’s reputation and a fund’s historical returns also ranked highly).
But one of the more interesting findings is that a quarter of respondents use technology to select ETFs—8 percent via robo-advisors and 17 percent through a portfolio-building tool designed for self-directed investors. Another 46 percent said they choose their own ETFs, while 29 percent said a financial advisor chooses ETFs for them.
When parsed by generational cohorts, millennials are most apt to select ETFs through a robo (12 percent), closely followed by Gen Xers (11 percent). They’re also most likely to choose ETFs aided by a portfolio-building tool designed for self-directed investors.
Meanwhile, millennials tied with GenXers as the cohorts that are least inclined to have advisors choose ETFs for them (both at 22 percent).
These findings raise the question of whether the popularity of ETFs—and the ease at which they can be bought without the guidance of advisors—will create a generation of do-it-yourself investors who don’t have much need for human advice.
At least one advisor, Anna Sergunina, president of MainStreet Financial Planning Inc. in Burlingame, Calif., says she’s not worried.