FTSE Russell’s 2024 Retail Investor Survey shows index funds empowering investors, revealing an opportunity for financial advisors.
- With high levels of client satisfaction, financial advisors should feel confident about introducing index funds to their retail investors, who want more information.
- Our survey shows how index funds are empowering investors to become more sophisticated.
- Millennials are leading the move into index funds, giving advisors a chance to engage with this group that tends to invest without advice.
When it comes to levels of client satisfaction, for many professions the picture may be mixed. Yet financial advisors are the exception. Their clients are staggeringly happy with the quality of service—pleased with their investment performance over the past year and confident in the 12 months to come.
Almost all, 94%, say that they’re satisfied, according to a FTSE Russell survey of more than 1,000 US retail investors conducted in early June[1]. This result is similar to a 2022 survey, when 92% were satisfied.
The trust they have earned gives advisors a clear opportunity to teach their clients about the advantages of index funds. Our survey shows how indexes are empowering investors, allowing them to build more sophisticated portfolios.
For advisors, there’s a clear benefit to engaging with clients and building loyalty. That’s because despite their high levels of client satisfaction, use of financial advisors appears to be declining, especially among Millennials (aged 28-43).
Use of index funds, however, is on the rise, with Millennials leading the charge. Our survey found that 45% of Millennials currently invest in index funds, up from just 27% in the 2022 survey. For comparison, 42% of Gen-X and 34% of Baby-Boomers say they currently invest in index funds.
Our survey revealed just how investors are leveraging the power of index funds. For instance, 51% use them to diversify portfolios and 41% for low fees. Large numbers also use index funds to manage portfolio risk, with 36% doing so.
This empowerment is making investors more assured. Investors in index funds are three times more likely to be optimistic about their portfolios’ performance over the next 12 months than those who are aware but don’t own index funds.
Among investors yet to invest in index funds, a lack of understanding is a key barrier. Forty two percent say they’re not sufficiently familiar with how index funds work, and 34% aren’t sure what type is best for them.
And here lies the advisor’s opportunity. Twenty one percent of investors report not being invested simply because their advisor hasn’t recommended it. What’s more, among those with an advisor, just 52% say they’ve discussed index funds, and of those a majority (77%) would like their advisor to discuss index investing with them.
Clients have an appetite for more information. This applies especially to Millennials, the younger generation of investors leading the move into index investing who also use advisors less than others.
1. A survey of 1,009 US retail investors was conducted between May 30 and June 6, 2024. It was the second FTSE Russell retail investor thought leadership survey, following the original in 2022. For more details see ‘A few facts about our research’ at the back of this document.
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