Newspaper icon
The latest issue of Financial Standard now available as an e-newspaper
READ NOW

ETFs dominate client portfolios: Study

Exchange-traded funds (ETFs) are dominating client portfolios as nine out of 10 financial advisers continue to recommend them to clients, a new study shows.

The 2024 Trends in Investing report reveals that more than 60% of advisers will up clients' allocations to ETFs over the next 12 months.

The 208 US-based financial advisers canvassed by the Journal of Financial Planning and the Financial Planning Association (FPA) said cash and equivalents (76%) were the next most-popular recommendations, followed by managed funds (64%), and direct stocks (51%) and bonds (47%).

While advisers feel more optimistic about the economy over the next six to 12 months compared to last year, they also plan to increase allocations to direct bonds and stocks, and cash.

Three-quarters of respondents said they are still confident in the 60/40 portfolio, up slightly from 71% last year.

Over the next two to five years, though, clients are concerned about the effects of higher interest rates (75%), which was the most frequently asked question thrown at their advisers.

The effect of inflation on clients' portfolios and retirement savings is the next hot topic of conversation (73%), followed by general volatility (62%).

More than half (56%) of advisers said they have re-evaluated client portfolios in the last three months. This is mainly in response to the economy in general, followed by anticipated changes in specific investments.

Life insurance remains a fundamental component of clients' financial plans with about one quarter of advisers receiving client queries about premium costs and confusion over product design or benefits. Term life insurance emerged as the most-used product (74%).

"However, with the rise of the FIRE movement, DIY investing, and "finfluencers" exposing consumers to financial products and strategies that may or may not be right for their situations, some consumers might need help understanding this mainstay of financial instruments," the report shows.

Read more: Financial Planning AssociationJournal of Financial Planning