In an era marked by persistent inflation, interest rate volatility, and shifting client priorities, advisors are rethinking the foundations of income generation.
While portfolio allocations to income-oriented investments remain stable at an average of 29%, the tools, vehicles, and strategies shaping those allocations are undergoing meaningful transformation, highlighting a a structural evolution in how advisors balance yield, risk, and client outcomes in a volatile macroeconomic environment.
The 2025 Nasdaq Global Indexes Income Allocation Survey reveals notable growth in the use of multiple income vehicles. Compared with 2023, usage of cash and cash alternatives rose 12%, passive ETFs increased 11%, and active mutual funds climbed 9%.
Advisors continue to rely on fixed income and dividend equities, but their expanding mix underscores a pivot toward liquidity, flexibility, and outcome-driven allocation.
InvestmentNews has been finding out more from Jillian DelSignore, head of Retail and Wealth Distribution Strategy for Nasdaq Global Indexes, who says that an 11-point jump in the percentage of advisors relying on wholesaler recommendations is exciting.
“It validates everything we've been saying about the evolving relationship between wholesalers and advisors,” she says. “While home office lists still lead at 44%, this growing influence shows advisors are increasingly valuing the specialized expertise and personalized guidance that wholesalers provide.”
Particularly compelling, she adds, is how this trend coincides with the complexity of today’s income landscape.
“When you see significant gains in cash/cash alternatives, active mutual funds, and passive ETFs, it tells me advisors need partners who can help them navigate an increasingly sophisticated toolkit.”
Among advisors using ETFs for income, 79% favor diversified, multi-asset income ETFs, while 53% turn to tax-aware ETFs.
The rise reflects growing demand for efficiency and tax optimization.
“The 11% increase in passive ETF usage validates our mission of making sophisticated strategies accessible,” DelSignore notes. “We’re doubling down on democratizing access through education, product innovation, and by equipping wholesalers with the specialized knowledge advisors value most.”
Despite the evolving toolkit, income allocations have held steady at around 29% for two consecutive surveys. A majority of advisors (63%) expect no changes in 2025, compared with nearly half (48%) who anticipated increases just two years ago.
“This stability reflects maturity in advisor thinking,” DelSignore explains. “The 29-30% allocation range suggests advisors have found a sweet spot that balances client income needs with overall portfolio diversification To me, this indicates advisors are moving from a ‘more is better’ mentality to a ‘smarter is better’ approach. They're focused on optimizing within that allocation rather than just expanding it.”
Both active and passive ETFs are growing reflecting the sophistication of today's advisor where solutions are chosen based on specific outcomes rather than broad categories.
“Active funds growing 9% alongside passive ETFs growing 11% tells me advisors are building truly customized solutions and value the active component of the strategy,” DelSignore adds, noting that this means investors are getting access to best-in-class strategies. “Whether it's the cost efficiency and transparency of passive ETFs or the tactical flexibility of active management, advisors now have the tools to construct portfolios that can adapt to changing market conditions while maintaining focus on client goals.”
The survey shows total return remains the leading driver of income allocations (42%), but paycheck replacement is gaining traction (32%), a sign of the aging client base and rising demand for retirement-focused solutions.
“We’re witnessing an evolution rather than a competition,” says DelSignore. “In today's environment, with advisors targeting 5.6% annual income yield, the line between total return and income generation is blurring. That 5.6% target is ambitious but potentially achievable with the right strategy. It’s important to focus on the needs of the specific investor and build a strategy that sets them up with the highest potential to reach those goals.”
Nasdaq Global Indexes’ work on income-focused indexes is designed to produce specific outcomes, whether that's consistent cash flow or total return optimization.
“The key is giving advisors flexible tools that can adapt as client needs evolve throughout their financial journey,” says DelSignore.
Looking ahead, advisors cite inflation (44%), market volatility (34%), and interest rate changes (33%) as the greatest risks to income portfolios over the next 12 months.
To counter these challenges, firms are adopting more dynamic strategies, blending traditional fixed income with alternatives, incorporating volatility-control methodologies, and leveraging index-linked solutions for inflation protection.
“The answer lies in dynamic, multi-layered approaches,” says DelSignore. “Our volatility control methodologies, for instance, help manage downside risk while maintaining upside participation. Index-linked solutions can provide inflation protection while managed volatility strategies help smooth the ride.”
The long-term picture points to three defining trends: increased demand for outcome-oriented solutions, greater sophistication in portfolio construction, and deeper advisor-wholesaler partnerships. DelSignore says that Nasdaq is positioning itself at the intersection of all three.
“Our mission of democratizing access to sophisticated tools has never been more relevant,” she concludes. “We’re focused on delivering innovation in index construction, expanding education, and strengthening partnerships—all in service of advisors who are building smarter, more resilient income strategies for their clients.”
The recently enacted OBBBA makes lower tax rates "permanent," though other provisions could still make earlier Roth conversions appealing under the right conditions.
Americans with life insurance coverage are far more likely to feel assured of their loved ones' future, though myths and misconceptions still hold many back from getting coverage.
Mounting regulatory pressures and proposed taxes are putting a strain on higher education institutions, forcing renewed focus on liquidity management and the secondary market for private equity.
Poll of 1,500 retirement plan investors finds 45% interested in private equity and private debt, with more than three-quarters saying they'd ramp up contributions as a result.
Most firms place a limit on advisors’ sales of alternative investments to clients in the neighborhood of 10% a customer’s net worth.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.
