More Than 90% of Financial Advisors Use ETFs, Survey Finds

Most prefer implementing a mix of active and passive funds.

More than 90% of financial advisors in a recent survey said they use or recommend exchange-traded funds, which demonstrates the financial vehicle’s popularity remains strong.  

Of those who do use or recommend ETFs, half plan to increase their usage in the next 12 months, according to “The 2023 Trends in Investing Survey” by the Financial Planning Association. 

Amir Noor, CFP and director of financial planning at the United Financial Planning Group in New York, told etf.com in an email that ETFs are a valuable tool in his firm’s investment strategy. 

“We do primarily invest in ETFs for our clients, as we find passive index investing to be in their best interest,” he said. 

Most of the survey’s respondents, 64%, favor a mix of using both active and passive funds in a tactical way, while 23% prefer passive only and 14% prefer active only. 

Beyond ETFs, which saw the most widespread usage, the remaining investment vehicles in the top five were cash and equivalents at more than 70%; mutual funds at about 65%; individual stocks at 50%; and individual bonds at about 48%.  

ETFs Overtaking Mutual Funds

Of the investment classes, ETFs were the ones most respondents agreed they would plan to increase using in the coming year. Mutual funds saw the highest number of respondents saying they planned to decrease their usage during that period, with about 25% saying that was the case. This reflects an ongoing trend of ETF investments overtaking mutual funds, which etf.com has been following extensively.  

About half of respondents said lack of liquidity is their top concern about alternatives, followed by fees and expenses in second place, and identifying suitable investment opportunities for client objectives in third. 

The survey’s findings are based on 191 responses from financial advisors, including a mix of planners who manage investments for their clients on a discretionary basis (70%); those who manage investments on a nondiscretionary basis (21%); and those who make investment recommendations but don’t implement them for clients (9%). The majority, 60%, operate a fee-only practice, while 36% collect a fee and a commission, and 4% work on commissions only. 

The survey noted that global ETFs racked up $754 billion last year, per Morningstar. Inflows hit $77 billion in the first quarter of this year, while international stock ETFs added up to $30 billion in the same period.  

Follow Michelle Lodge on Twitter @lodgemich