A new survey report published by Incapital LLC combines the outlooks of some 200 U.S. financial advisers who were asked about client perceptions and behaviors on the fixed-income side of investing.

According to Incapital, advisers say they like bonds for predictable income and diversification. At the same time, many advisers say the ongoing development of bond-focused exchange-traded funds (ETFs) has “changed the definition of fixed income-investing.”

“Over 70% of financial advisers surveyed believe it’s going to take a significant correction in the equity markets to wake all investors up to the portfolio benefits of fixed income investing,” the survey report says.

Incapital finds half of surveyed advisers expect their clients will be increasing allocations to fixed income or cash over the next 12 months. Fewer (29%) say they expect an increase in equities, survey results show—despite the fact that a solid majority (76%) of advisers say “principal protection” has become a top priority for their clients.

“With prolonged low interest rates and the sustained equity bull market, investors seeking income might have become comfortable taking on equity risk to accomplish income needs,” says Paul Mottola, managing director and head of capital markets at Incapital. “That may explain why advisers say it will take a significant correction in the equity markets for investors to appreciate the benefits of fixed income. But with increased volatility in the market, we believe investors will now be far more receptive to assessing some of the potential benefits that are typically associated with fixed income, such as portfolio diversification and lower volatility.”

According to Incapital, advisers feel there is strong opportunity to help clients design and maintain bond ladders, with 80% saying bond ladders are “extremely effective” at helping investors manage interest rate risk.

“Coincidentally, the risk of rising rates was the advisers’ top-ranked concern with fixed-income investing,” the report says, “followed by finding good fixed-income solutions in a low-rate environment, and generating income without increasing portfolio risk.”

Results of the survey suggest almost two-thirds of advisers agree that the emergence of bond ETFs has “changed the definition of fixed-income investing away from predictable income and return of principal, to fixed-income exposure.” According to Incapital, it is important to understand that many of the features and risks for bond ETFs differ from those of individual bonds.

“ETFs generally represent a diversified portfolio of securities which trade as one security on a public stock exchange. These features do help mitigate market and credit risk and provides holders with ease of tracking and strong market liquidity,” the report says. “However, they don’t typically have a fixed distribution rate, and given the portfolio strategy, they may also have a fixed-interest rate duration, meaning that the interest rate sensitivity will generally remain constant over time, which is an important consideration with the risk of rising rates. Individual bonds issued by corporations are subject to overall market risk, interest rate risk, liquidity risk (ability to sell bonds in the secondary market), and the overall credit worthiness of the issuer. If the issuer defaults, the coupon payments (predictable income) and principal will be at risk.”

When asked what would get them to use more individual bonds in their clients’ portfolios, a plurality of advisers pointed to a rate increase (38%). However, they also noted that if they had a simplified process to access bonds (32%), access to better online tools for evaluating bonds (28%), and more/better education on bond investing (24%), they would likely increase their use of individual bonds.