Despite the commonly held view that exchange traded funds (ETFs) are most popular with younger investors, a new whitepaper from Pershing, a BNY Mellon company, in conjunction with Beacon Strategies, finds that investors between the ages of 51-70 who work with advisors are, in fact, the largest users of ETFs, followed by those over the age of 71.
The report, The Evolving ETF: Using Exchange Traded Funds in Client Portfolios, surveyed more than 1,500 advisors in the U.S and around the globe. More than two-thirds of advisors who use ETFs intend to increase their usage over the next 12 months, while 55 percent said that more than half of their clients already have ETFs in their portfolios.
“The widespread assumption across the investment management industry is that the continued growth and popularity of ETFs is being driven by younger investors. However, advisors are telling us that this is not necessarily the case,” said Justin Fay, director of financial solutions for alternative investments and ETFs at Pershing.
“We found that ETF usage in portfolios is most prominent among the Baby Boomer and Greatest Generation populations, mainly because these investors have become increasingly aware of the cost efficiency and access to a variety of styles that ETFs may provide, which can help them achieve their financial goals,” he added.
Pershing and Beacon Strategies’ whitepaper revealed a number of other key findings, such as:
- Advisors view ETFs as critical investments in client portfolios
- Performance is the key criteria for choosing a specific ETF
- Further education needed around ETFs
“ETFs can be a particularly attractive investment option for advisors, offering customizable solutions and potentially lower-cost access to markets, countries and sectors than many other comparable investment vehicles. While the RIA channel continues to dominate in terms of ETF use, we are seeing increased adoption across other channels, particularly independent broker-dealers who are implementing ETFs more frequently within portfolios, and this trend is expected to continue,” concluded Fay.
To obtain a copy of Pershing’s whitepaper, follow this link.