More than half (55%) of advisors reported that mutual funds represented a meaningful portion (defined in the survey as between 40% and 50%) or a significant portion (more than 75%) of client portfolios. This trend was stronger for advisors at large firms (63%) than it was for independent RIAs (45%). Individual stocks were a distant second in terms of popularity, with ETFs and separately managed accounts tied for third just below stocks. At the same time, more than a quarter of advisors (27%) reported modest use (between 20% and 30%) of ETFs, while just 15% of advisors reported modest use of separately managed accounts.
Structured notes, private equity and limited partnerships, and hedge funds were the least likely products to account for a meaningful or significant portion of client assets—perhaps unsurprisingly given the specific and supporting role these products typically play.
Advisors’ tendency to favor mutual funds over ETFs aligns with results showing that advisors tend to favor active management strategies. Advisors were far more likely to select active over passive strategies in both equity funds (52% versus 17%) and fixed income funds (55% versus 21%). When selecting active strategies, advisors listed risk-adjusted return measures and expense ratios as the factors they valued the most.
Next Part 2 of 4: Equities Over Bonds