1. Review of asset allocation.

Most advisors—68 percent, in fact—are having another look at asset allocation in their clients’ portfolios, or they had done so within the past three months. At issue: anticipated or existing changes to the economy in general, and/or market volatility.

About a third cited tax reform (the Tax Cuts and Jobs Act) is cause to reevaluate, while a third also indicated that anticipated changes in inflation are making them take another look. For 64 percent of respondents, reevaluation of their asset allocation strategy is a continuous process.

Only 30 percent of advisors had not done any reevaluation, while two percent said they did not know. (Photo: Shutterstock)

2. Major preference for ETFs.

There’s been a slight move toward passive management on the part of advisors, going from 15 percent in 2017 to 22 percent in 2018, although most continue to prefer a blend of active and passive. But one thing they’re clear about is their preference for ETFs, which has been on the rise for the past eight years. In fact, 87 percent of advisers surveyed currently use or recommend ETFs with clients, and 73 percent currently use or recommend mutual funds (nonwrap).

According to the study, this is “the widest gap between ETFs and mutual fund usage reported since ETFs overtook mutual funds in recommendation/usage in 2015. (Photo: Shutterstock)

3. Slight return to stocks.

In the wake of the financial crisis, advisors were moving client assets around, and by 2010, the study reports, they had “clearly shifted out of individual stocks and into index products including ETFs and mutual funds.”

In the same year, they also “showed a significant shift into cash and equivalents and fixed annuities.” But they’ve been gradually moving back into individual stocks—although not to the extent they had prior to 2010—and their use or recommendation of fixed annuities has nearly fallen back to pre-2010 levels. They are, however, retaining cash and equivalents. (Photo: Getty)

Some of the changes in investing patterns by advisors in the wake of the financial crisis are beginning to shift back from moves to safety that arose out of the Great Recession.

That’s according to the 2018 Trends in Investing Survey, conducted by the Journal of Financial Planning and the FPA Research and Practice Institute, which finds that some trends that emerged in the wake of the 2007–2008 financial crisis have, since 2010, solidified—while others have backed off.

While the financial crisis drove advisors into “safety” moves, the report says, with 2010 being the pivotal year, not all those moves have been sustained. And since eventually the pendulum tends to swing in the other direction, portfolio moves include some returns to products and patterns that predated the Great Recession.

There’s also been little action in some areas in which it might be expected that advisors would adopt new products, methods or technology. The survey, first begun in 2006, has not only tracked investing trends over the last 12 years, but also added new questions to identify new areas of interest.

Advisors this year, for instance, were asked about their use or recommendation of environmental, social and governance funds. Replies indicate that 26 percent of respondent advisors currently use and/or recommend ESG funds, and 20 percent plan to increase their use/recommendation of them over the next 12 months.

Asked about their clients’ concerns over the past six months, 76 percent of respondents cited the effects of volatility on client portfolios; 68 percent said clients were concerned about the effects of the Tax Cuts and Jobs Act (tax reform) on their portfolios; 53 percent said they were interested in cryptocurrencies; 49 percent, fees and other investment costs; and 38 percent, ESG/socially responsible investing.

And among the “other” concerns cited by 6 percent of respondents, the most common were the effects of the political environment; the effects of rising interest rates; and the level of equity exposure.

Advisors themselves were bullish in the short term—the next six months—but for the next six months after that, says the report, “their longer-term expectations for the economy are waning, with a slight uptick in bearish sentiment for their two-year and five-year outlook.”

But that doesn’t necessarily mean that they’re ready to abandon older strategies, such as a portfolio composed 60 percent of stocks and 40 percent of bonds. Fifty-one percent, in fact, say they’re somewhat to very confident in the traditional 60/40 portfolio, which is comparable to the results in the 2017 survey. And the percentage “very doubtful” that 60/40 can still provide historical returns actually fell from 10 percent in 2017 to 5 percent this year, while slightly fewer advisers were neutral on this in 2018 (12 percent) than in 2017 (14 percent).

A nontrend, which might surprise some, is the matter of cryptocurrencies. Just one-percent of advisors, the study finds, are using and/or recommending cryptocurrencies. Asked what they think of cryptocurrencies as an investment, nearly 30 percent agreed with the statement that cryptocurrencies are “an interesting concept to keep an eye on, but not invest in yet.”

If there is a trend around cryptocurrencies in client portfolios, it’s that the low usage thus far will probably continue for the next year; only two-percent plan to increase their usage/recommendation of cryptocurrencies over the next 12 months.

The slides above show three trends that emerged in the survey.