Financial planners continue to prefer ETFs in client portfolios

DENVER (June 3, 2024) – Exchange-traded funds are financial planners’ top choice for the investment vehicle they most often use/recommend with clients, and their popularity does not appear to be weakening, according to the 2024 Trends in Investing survey, conducted by the Journal of Financial Planning and the Financial Planning Association.

The survey, conducted annually for over a decade, has provided valuable insights into the current landscape of investment preferences and recommendations by financial professionals. With 208 responses from financial planners, the 2024 survey reveals the developing trends and challenges financial planners see in their work with clients.

ETFs continue to dominate investment portfolios

The survey highlighted that ETFs continue to dominate investment portfolios, with over 89% of respondents currently using or recommending these products. Furthermore, over 60% of respondents plan to increase their use of ETFs in the next 12 months, reflecting a strong preference for this investment vehicle.

Client concerns and investment preferences

Financial professionals expressed increased bullishness about the economy in the near term but a slightly darker outlook over the next two to five years. Client concerns revolve around interest rates (75%), inflation (73%), and general volatility impacting their portfolios (62%). The survey highlighted that cash and equivalents (81%), non-wrap mutual funds (68%), individual stocks (53%), and individual bonds (50%) are prominent components of client portfolios, with individual bonds and stocks being the most likely to see increased allocations over the next 12 months.

Life insurance: Challenges and opportunities

The survey revealed that life insurance remains a fundamental component of clients’ financial plans. Over a quarter of respondents reported receiving client inquiries about premium costs and confusion over product design or benefits, highlighting the need for professionals to help clients better understand life insurance products and their role in portfolios. Term life insurance emerged as the most used product (74%), with a strong demand for long-term care benefits. And over 40% of professionals are using or recommending linked-benefit LTC insurance for their clients.

While most professionals are confident in their approach to using or recommending life insurance products, challenges in educating clients about product features (31%) and identifying suitable coverage (15%) were reported. Additionally, concerns were raised about administrative issues and poor servicing from life insurance agents, suggesting opportunities for improvement in the client experience.

Other key findings:

• Compared to 2023, cash and equivalents saw the sharpest increase in financial professionals who expect to decrease their use of these vehicles, from 14% in 2023 to 29% in 2024.
• The survey continues to reveal that many financial professionals favor a hybrid approach to investment management.
• While confidence in the traditional 60/40 portfolio continues to be strong, those with doubts fell from 21% in 2023 to 16% in 2024.

"2024 embodies the old saying 'May you live in interesting times.' With everything going on, consumers need trusted financial planners more than ever. The 2024 Trends in Investing Survey illustrates that planners are stepping up to the plate to help guide consumers through turbulent waters," said Lee Baker, CFP^®, practitioner editor of the Journal of Financial Planning.

Of those surveyed, 87% are Certified Financial Planner professionals, 55% indicated they work as an independent IAR/RIA, and 53% say they have more than 21 years of financial services experience. The 2024 Trends in Investing survey was conducted from March 4, 2024, to April 3, 2024, and received 208 responses.

 

Additional research by FPA is available at www.financialplanningassociation.org/learning/research.