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October 9, 2015

Millennials and ETFs

According to the recently released Schwab 2015 ETF Investor Study, ETFs account for 41% of millennials portfolios compared with just 17% for boomers and 21% among all investors.

The study goes on to show that although ETFs are becoming more popular among all generations, there is definitely a gap when it comes to Millennials (aged 25-35). Not only are they most heavily used by Millennials now, but 61% plan to increase their ETF investments in the next year. They also have a bright outlook on the future of ETFs in general. 70% of Millennials see ETFs as the core investment type in their portfolio in the future. Significantly, 77 percent say they would consider using stock-based ETFs instead of individual stocks in their portfolios and 69 percent would consider using fixed income ETFs instead of individual bonds.

Overall Investor Sentiment
While overall, investors are not AS enthusiastic about ETFs as the Millennials, it is still catching on. Right now investors are allocating 21% of their portfolios to ETFs, and 31% say they plan to increase their ETF investments in the next year, while only 3% foresee a reduction. 61% of ETF investors would consider using stock-based ETFs instead of individual stocks in their portfolio, and 55% say they would consider using fixed income ETFs instead of individual bonds. On top of that, 34% say ETFs will form the core of their investment portfolios in the future.

What This Means for Advisors
One-third (32%) of investors say they are interested in an all-ETF portfolio that an advisor creates and manages for them.

ETFs are becoming a necessity for investment advisors who want to stay competitive in this changing investment landscape. There is a lot of opportunity to capture AUM in the younger millennial generation, especially if you can meet their demand for the fresh new investment vehicles that they desire. It is taking longer to catch on among older generation, but as the study shows ETFs are still showing steady growth among all generations. Time to get on board!

As Heather Fischer, Vice President of ETF Platform Management at Schwab said, “More investors are viewing ETFs as the foundational component of a well-diversified investment portfolio, and we think that sentiment will continue to grow.”

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3D Asset Management is an all ETF portfolio manager providing value enhancing solutions to financial advisors. Whether you need a plan that resonates with your clients and clearly communicates your value, or compliant FINRA reviewed marketing and sales support, or a technology platform to manage and track your clients' retirement income plan for years to come, 3D has the tools you need. Contact us now to learn more about how we can help you build a better practice.