ETFs Are Millennials' Product of Choice: Schwab

The most surprising finding in the study, Droller said, was gender differences. Men and women were "pretty closely" aligned in the amount of ETFs used in the portfolio (about a third overall), the difference, she said, was in experience, where 46% of millennial male respondents were more apt to select ETFs for their portfolio themselves, verses 33% of women. A similar differential was across all generations, although boomers and matures were more likely to do their own selection or use an advisor rather than use technology.

The study also found that low expense ratio still was a key factor in selecting ETFs, with 95% of respondents saying it was extremely or somewhat important. Total cost, including commissions, expense ratio and bid/ask spread, was just as important. Also in the 90%-and-up zone in importance was how well an ETF tracked to its index, reputation of the ETF provider, and historical returns of the ETF.

In addition, the importance of commission-free ETF trading has grown over time. In 2015, only 18% of participants said commission-free ETFs were "most important" to them and they would move to a brokerage firm that offered them. Today that number has grown to 31%. Again, millennials were most adamant about commission-free ETFs, with 79% stating it was a most or very important factor.

Finally, investors were firm about not wanting additional fees, such as short-term redemption fees for selling an ETF within 30 days of purchase; 91% said this was extremely or somewhat important. Brokerages also needed to have a broad selection of ETF categories and providers.

Ginger Szala is executive managing editor of Investment Advisor. She can be reached at [email protected].