Client engagement drives advisors’ tech adoption
Financial advisors are allocating more assets to active management strategies, with average allocations rising to 57% of total assets and expected to reach 60% in the coming months, according to the 2025 Advisor Brandscape report by Escalent released this week.
The report, based on a survey of 1,550 registered financial advisors conducted from January to March 2025, shows a sharp rise in demand for actively managed products, particularly exchange-traded funds (ETFs).
Advisor allocations to ETFs climbed to 32.6% of assets under management (AUM), up from 23.6% in 2023, while mutual fund allocations declined from 26.5% to 19.7% over the same period. Active ETFs now represent 29% of ETF assets, up from 25% in 2023, with 80% of advisors reporting use of active ETFs in their strategies.
“We’re seeing a notable shift in advisor sentiment, with heightened interest in actively managed investments, including US equities, US fixed income, and ETFs,” said Meredith Lloyd Rice, vice president in Escalent’s Cogent Syndicated division.
The market’s pivot toward active ETFs aligns with a broader trend in the industry. Reuters reported that Vanguard, known for its index-based products, filed plans to launch its first actively managed US stock ETFs this year. The new products, which will be managed by Wellington Management, will offer dividend growth, growth stock, and value stock strategies.
According to JP Morgan Asset Management data cited in the same report, 86% of the 630 exchange-traded products launched this year were actively managed, and active ETFs now account for roughly 37% of total US ETF inflows.
Investor behavior may be playing a role in these shifts. Morningstar published that investors in actively managed bond and international stock funds earned higher average returns over the past decade compared to those in low-cost index funds, largely due to fewer attempts at market timing.
Actively managed taxable bond funds delivered an average of 1.4% annual returns over the last 10 years, compared with 0.8% for indexed taxable bond funds, while actively managed international stock funds averaged 5.2% annually, compared with 4.2% for indexed international stock funds.
As client engagement takes priority—advisors reported spending 59% of their time on relationship-building this year, up from 56% in 2023—firms are also turning to artificial intelligence and other tools to enhance client communication. Nearly half of advisors now incorporate AI into their business operations, according to the Escalent report.
