ETFs Top Mutual Funds In Popularity With Financial Advisors
ETFs have overtaken mutual funds as the top investment choice of financial advisors. More than 80% of advisors recently surveyed by the Financial Planning Association use or recommend ETFs. And more than half — 51% — planned to increase their use or recommendation of these investments.
Exchange traded funds were the most popular investment vehicle among 17 options in the survey.
Stand-alone mutual funds — those not in wrap accounts (which are pools of funds with one annual fee) — came second, with 78% of advisors surveyed using or recommending them to clients.
The 2015 Trends in Investing Survey shows that ETFs continue to grow in popularity. Only 40% of survey participants used or recommended these investments in 2006. That number grew to 44% in 2008 and to 79% in 2014.
For 76% of respondents, ETFs’ low cost was their biggest plus over mutual funds. Their tax efficiency and tradability also rated highly with advisors.
Despite the fuss over smart beta, survey results show that only 22% of advisors had used smart beta ETFs with clients in the previous 12 months. Fourteen percent of survey respondents said their use of smart beta ETFs had increased over the last 12 months. For 1%, it decreased. For 25%, it stayed the same.
SPDR S&P Biotech (ARCA:XBI) is a top-performing smart beta ETF, advancing 83% in the past year as of Tuesday. It’s up 1.2% on the stock market today.
Among other findings:
Active vs. passive. A majority of advisors — 61% — believed active and passive strategies should be blended for successful investing. But the survey found 24% were likely to have increased their use of passively managed funds over the last year vs. 15% for actively managed funds.
Economic outlook. Advisors had an overall positive long-term view of the economy, with 51% bullish for the next five years. For the next six months, that number dropped to 41%.
The survey was conducted in March and 303 financial advisors responded online.
Follow Aparna Narayanan on Twitter:@IBD_ANarayanan