Despite the commonly held view that exchange traded funds are most popular with younger investors, a new whitepaper from Pershing LLC, a BNY Mellon company, in conjunction with Beacon Strategies LLC, finds that investors between the ages of 51-70 who work with advisors are, in fact, the largest users of ETFs, followed by those over the age of 71. 

The report, The Evolving ETF: Using Exchange Traded Funds in Client Portfolios, surveyed more than 1,500 advisors in the U.S and around the globe. More than two-thirds of advisors who use ETFs intend to increase their usage over the next 12 months, while 55 percent said that more than half of their clients already have ETFs in their portfolios.

"The widespread assumption across the investment management industry is that the continued growth and popularity of ETFs is being driven by younger investors. However, advisors are telling us that this is not necessarily the case," said Justin Fay, director of financial solutions for alternative investments and ETFs at Pershing.

"We found that ETF usage in portfolios is most prominent among the Baby Boomer and Greatest Generation populations, 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," he added.

Pershing and Beacon Strategies' whitepaper revealed a number of other key findings, such as:

• Advisors view ETFs as critical investments in client portfolios

  • 64 percent of advisors said ETFs are core to their clients' portfolios, signaling greater acceptance of the asset class

  • While the percentage of ETFs included in client portfolios varies greatly, 55 percent of advisors said more than half of their clients had ETFs in their portfolios

• Performance is the key criteria for choosing a specific ETF

  • When choosing a specific ETF, performance is most important (43 percent) and the provider's brand recognition is least important (2 percent)

• Further education needed around ETFs

  • "Concerns around ETF structure" was the biggest barrier to advisor use of ETFs, signaling a need for further education and potential market structure improvements

The whitepaper also incorporates interviews with various industry stakeholders, including advisors, registered investment advisor executives, global wealth managers and ETF managers, looking at a range of other ETF-related issues such as:

• The growth of ETFs across various channels;

• The increased interest and demand for ETFs and growth potential outside U.S markets and;

• The impact of the Department of Labor Conflict of Interest Rule as it relates to potential greater utilization of ETFs.

"ETFs can be a particularly attractive investment option for advisors, offering customizable solutions and potentially lower-cost access to markets, countries and sectors than many other comparable investment vehicles. While the RIA channel continues to dominate in terms of ETF use, we are seeing increased adoption across other channels, particularly independent broker-dealers who are implementing ETFs more frequently within portfolios, and this trend is expected to continue," concluded Fay.