Advisors’ shuffle away from cash reaches its fifth year
Advyzon has unveiled its third annual asset allocation study shedding light on new trends in financial advisors’ investment strategies.
The report titled “What’s Going On With Assets in 2024?” delves into the asset allocation choices of over 1,500 advisory firms utilizing Advyzon’s portfolio reporting services as of the end of 2023.
A notable trend identified in the 2024 study is the continued reduction in cash allocations by advisors throughout 2023. From north of 10 percent at the end of 2019 when Advyzon first started recording investment data for firms on its platform, cash allocations have gone on a steady decline yearly to reach just 4.6 percent by the end of 2023.
“The end-of-year expectation in 2023 was that the Fed would lower rates six times in 2024,” Brian Huckstep, CIO of AIM, Advyzon’s TAMP, said in a statement. “That may have prompted some investors to preemptively exit cash and very short-term bonds to seek better returns in longer-dated bonds or other investments.”
This shift might have cost some advisors, however, as they could have missed out on higher-than-average yields from short-term debt and cash equivalents.
Another significant finding in the report is the widening preference for ETFs over mutual funds, with advisors allocating nearly 30 percent to ETFs by the end of 2023, compared to roughly 22 percent to mutual funds.
Explaining the trend, Buckstep pointed to the rise of buffer ETFs designed to mitigate downside risk, effectively putting them in a portfolio turf war against structured notes.
He also noted the growing popularity of lower-priced ETFs, a trend bucked by SPDR’s SPY. Despite SPY’s higher cost of 0.09 percent, triple the sticker price of Vanguard’s VTI or IVV, the dollars held in
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