Investors are pouring huge amounts of capital into exchange-traded funds, attracted by their low cost and investment flexibility.
A survey of 1,500 financial advisors released this week by Pershing, a BNY Mellon company, in conjunction with Beacon Strategies examines ETFs’ explosive growth.
The survey found that 64% of advisors considered ETFs core to their clients’ portfolios, while 24% said they used these vehicles for diversification. Sixty-eight percent of advisors in the study who used ETFs said they would increase usage over the next 12 months.
In addition, 55% said more than half of their clients had ETFs in their portfolios. This included 35% of advisors that had between three-quarters and 100% of clients with ETFs in their portfolios.
The survey upended a widespread industry notion that ETFs particularly resonate with younger investors. It found that 48% of baby boomers were receptive to ETF use, followed by 29% of investors 71 and older. In contrast, only 17% of Gen Xers and 6% of millennials used ETFs.
Justin Fay, director of financial solutions for alternative investments and ETFs at Pershing, said in a statement that ETF usage in portfolios was most prominent among the older cohort “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.”
ETF asset flows in June set a record. Last year, ETFs gathered in $238 billion, nearly on a par with their record inflows of $243 billion set the previous year. Earlier this year, PricewaterhouseCoopers forecast that global ETF assets would reach $5 trillion by 2020.