NewsAnalysis
IS THE ERA OF STOCK SPECULATION OVER? Advisors are using more ETFs at the expense of single stock trading BY GREGG GREENBERG
C
ome on, wealth managers! Don’t you want to speculate once in a while? Maybe pick one of those high-flying meme stocks, or even a Magnificent 7 member, and just let it ride? No? Fine! Just put your client funds into an ETF then. The exchange-traded fund (ETF) market has surpassed $11 trillion, driven by a strong equity market and solid organic growth, with $511 billion in inflows during the first half of 2025, according to the latest Cerulli report. Furthermore, advisors increasing existing allocations to ETFs has been a major factor contributing to ETF asset growth, with 52 percent of asset managers considering it a major driver and 48 percent saying it is something of a driver. In 2024, advisors allocated 21.6 percent to ETFs, up from a mere 11.2 percent a decade earlier, in 2015. The Cerulli study noted the growth of the ETF has come at the expense of two other investing vehicles: mutual funds and individual securities. And the move toward ETFs is far from over. Financial advisors expect their ETF allocations to rise to 25.5 percent in 2026, a higher percentage than their projected allocation to mutual funds for the first time. “ETFs have numerous advantages over individual stocks − namely, exceedingly low-cost diversification, combined with significant tax advantages for longer term investors,” says Rick Wedell, chief investment officer at RFG Advisory. “In today’s marketplace, you can access low-cost active or passive ETF structures with internal expense ratios in the 20s or lower. That’s 0.2 percent to get access to hundreds of individual stocks, in some cases that are being actively managed by a strategist.” From a fiduciary perspective, Bryan Bibbo, president and CFO of JL Smith Holistic Wealth Management, believes ETFs make it easier to construct tax-efficient, balanced portfolios that align with a client’s time horizon and risk profile. “We tend to use core ETFs that track broad indices like the S&P 500, quality dividend ETFs, and sector-specific funds for tactical tilts. We also use
8 | InvestmentNews November 10, 2025
fixed-income ETFs for liquidity management within our ‘soon’ and ‘later’ buckets,” Bibbo says. Alas, sooner or later ETFs will dominate client portfolios. But what about the smiles that come with picking a winner? As the great market-watcher Robert Plant once asked during a performance of “Stairway to Heaven,” about the bubblish good times: “Does anybody remember laughter?” Or just the unfortunate aftermath?
ETFs TAKE OFF ETF market has surpassed $11 trillion $511 billion in inflows during the first half of 2025 Advisors allocated 21.6% to ETFs in 2024, up from 11.2% in 2015 Cerulli: Advisors expect ETF allocations to rise to 25.5% in 2026 of daily tax-loss harvesting opportunities, which aren’t possible in a packaged product like an ETF. “By realizing losses and offsetting gains throughout the year, we can improve after-tax returns and enhance overall tax efficiency. In this sense, individual stocks can actually offer more flexibility and control than ETFs for certain taxable portfolios,” Alison says. Similarly, Stephen Tuckwood, director of investments at Modern Wealth Management, prefers to allocate to broad-based asset-class and sectorlevel ETFs. He turns to individual stocks when taxes are a top priority and where implementing a direct indexing strategy makes sense. “With individual stocks, the client owns their own cost basis in each individual position, often with multiple lots per position. Since the client is not sharing an investment vehicle with other investors, their actions can’t impact the client’s journey and we can provide more precise tax forecasts,”Tuckwood says.
“If a client wishes to speculate on a stock outside of the confines of their personal investment plan, we suggest they have a play account at a discount brokerage to do so” TODD RABOLD, CALLAN FAMILY OFFICE THE EXCEPTION THAT PROVES THE RULE
To be clear, there is still a growing market for single stock picking among advisory clients. But it’s generally limited to high-net-worth investors and is not of the speculative variety. ETFs offer a fast, tax-efficient way to get diversified exposure, which often appeals to mass affluent investors and advisors who value simplicity and scale. However, high-net-worth investors are increasingly leaning into direct indexing, using individual stocks to build tailored portfolios that reflect their views, specific constraints, and, crucially, tax management strategies. “Our UMA structure and direct indexing partnerships are helping bring this level of customization to scale,” says Jen Wing, chief investment officer and head of investment solutions at GeoWealth. Similarly, Dave Alison, president of Prosperity Capital Advisors, prefers using individual stocks through a diversified separately managed account (SMA) when managing post-tax, or non-qualified, money. This approach allows him to take advantage
Yeah, direct indexing may be great for wealthy folks who can afford a massive basket of individual stocks. But it still doesn’t offer the thrill of buying Oklo at $20 in January 2025 and watching it fly to $175 in October. Who cares that the nuclear microreactor manufacturer lost $74 million last year? It went up, right?
NOT ON MY ADVISORY WATCH!
RFG’s Wedell contends the concept of speculating with client assets is not truly his job as a fiduciary. In his view, most client assets that he manages are in the context of a relatively complex financial plan, and ultimately it’s the machine that makes the decisions in the form of a Monte Carlo simulation. “That simulation breaks down if you start speculating – because now the client’s investment performance doesn’t really behave in the way the simulation expects,” Wedell says. “The simulation is looking for you to own a broadly diversified portfolio, not a single stock. Which means, if you own a concentrated portfolio, you’ve probably shot
InvestmentNews.com