A Close Look at ETF Households A Report by the Investment Company Institute and Strategic Business Insights September 2018

About This Report

Strategic Business Insights' (SBI's) Consumer Financial Decisions (CFD) group, in collaboration with the Investment Company Institute (ICI), is pleased to announce the availability of a new report on households that own exchange-traded funds (ETFs). This report primarily focuses on ETF households drawing on data collected in SBI's MacroMonitor survey fielded in 2016. To better understand the ETF households, they are compared with retail mutual fund households and all US households. The report focuses on demographic characteristics of ETF households, exploring their age, education, and income composition, as well as their life stage. It also analyzes key financial metrics to understand ETF households' balance sheets, and reports on their motivations for saving. It provides insights into ETF households' financial decision-making processes, and analyzes their use of financial strategies, the types of financial services firms they engage with, and their use of financial advice. Finally, it analyzes their attitudes on investment risk and their views toward equity investing, and reports on the wide range of investments these households hold.

What Are ETF and Retail Mutual Fund Households?

ETF Households

For this study, ETF households are households that currently own ETFs outside of retirement accounts or have bought an ETF within the past two years. (Some of these households also own mutual funds.)

Retail Mutual Fund Households

For this study, retail mutual fund households are households that own stock or bond mutual funds outside of retirement accounts. (None of these households owns ETFs, because ETF households were gathered first for analysis.)

About the MacroMonitor

The MacroMonitor is the largest, continuously fielded, comprehensive research program on US consumers' financial needs. Since 1978, the MacroMonitor has provided reliable, validated, single-source research about US economic households' financial needs, attitudes, behaviors, channel use, demographics, ethnicity, and trends. The MacroMonitor measures all financial areas: transactions, credit, assets, retirement, insurance, information, advice, intermediaries, and institutions. Access to the MacroMonitor deliverables and supporting services are available through subscription and consulting assignment.

The MacroMonitor is produced by Consumer Financial Decisions, part of Strategic Business Insights. In addition to Consumer Financial Decisions, SBI (an employee-owned spin-off of SRI International) includes Scan™, Explorer, VALS™, Driverless Futures, and other Strategic Consulting Services. For more information please contact us.

About the Investment Company Institute

The Investment Company Institute is the leading association representing regulated funds globally, including mutual funds, exchange-traded funds, closed-end funds, and unit investment trusts (UITs) in the United States, and similar funds offered to investors in jurisdictions worldwide. ICI seeks to encourage adherence to high ethical standards, promote public understanding, and otherwise advance the interests of funds, their shareholders, directors, and advisers.

Download this Report

Table of Contents

Key Findings 1
Introduction 3
Growth of ETFs and Mutual Funds 3
Research Agenda 7
Characteristics of ETF Households 8
ETF Households Tend to Be Younger, Higher Educated, and Higher Income 8
ETF Households Tend to Be at Earlier Life Stages Than Retail Mutual Fund Households 11
ETF Households Have Significant Financial Assets 13
More Than Three-Quarters of ETF and Retail Mutual Fund Households Are Saving for Retirement 14
Majority of ETF Households Have Retirement Accumulations 16
Decisionmaking by ETF Households 17
ETF and Retail Mutual Fund Households Tend to Have Financial Strategies 17
Households Rely on a Full Range of Financial Services Firms 18
ETF Households Are More Self-Reliant and More Confident About Investing 20
ETF Households Are More Aware of Robo-Advisers 22
Risk Taking and Investing by ETF Households 24
ETF Households Are More Willing to Take Financial Risk 24
ETF Households Embrace Equity Investing 26
Notes 29
References 30

Exhibits

Background on the ETF Market  
Exhibit 1: ETF Assets Have Grown 3
Exhibit 2: Mutual Funds Are More Established Than ETFs and Held by More Households 4
Exhibit 3: Fewer Than One in 10 US Households Report ETF Ownership 5
Characteristics of ETF Households  
Exhibit 4: ETF Households Tend to Be Younger Than Retail Mutual Fund Households 8
Exhibit 5: ETF Households Tend to Have High Education Levels 9
Exhibit 6: ETF Households Represent a Range of Moderate to Higher Incomes 10
Exhibit 7: ETF Households Are More Likely to Be in Earlier Life Stages Than Retail Mutual Fund Households 12
Exhibit 8: ETF Households Have Higher Average Balances for All Financial Metrics Than All US Households 13
Exhibit 9: More Than Three-Quarters of ETF and Retail Mutual Fund Households Are Saving for Retirement 15
Exhibit 10: ETF Households Often Have Retirement Accumulations 16
Decisionmaking by ETF Households  
Exhibit 11: Vast Majority of ETF and Retail Mutual Fund Households Have Financial Strategies 17
Exhibit 12: ETF Households Are More Likely to Use a Discount Broker Than Retail Mutual Fund Households 18
Exhibit 13: ETF and Retail Mutual Fund Households Rely on a Range of Financial Professionals for Advice 19
Exhibit 14: ETF Households Are More Likely to Rely on Online Sources of Information About Financial Products Than Other Households 20
Exhibit 15: ETF Households Are More Confident About Making Investment Decisions 21
Exhibit 16: ETF Households Are More Aware of Robo-Advisers 23
Risk Taking and Investing by ETF Households
Exhibit 17: ETF Households Are More Willing to Take Financial Risks Than Retail Mutual Fund Households 25
Exhibit 18: ETF Households Have Positive Attitudes Toward Stock Investing 26
Exhibit 19: Bulk of ETF Assets Are Invested in Equities 27
Exhibit 20: ETF Households Hold a Broad Range of Investments 28