Advisors shift from mutual funds to sector ETFs as ETF inflows hit record $2T in 2025

Financial advisors are increasingly favoring sector ETFs over mutual funds, with ETF allocations expected to surpass mutual fund allocations by 2027. This shift is driven by a decline in corporate dividends, replaced by share buybacks, prompting advisors to seek income through sector funds like utilities. Global ETF inflows reached $2 trillion in 2025 and continue to accelerate, leading to an upward revision of ETF asset forecasts to $63.49 trillion by 2035. Sector ETFs also offer targeted exposure to growth themes such as AI-related technology investments.