Page 17 - Newcom

“It might also
come from actively
designing a bespoke
or customized index.
For example, our
product and portfolio
management team
here at TDAM
actively helped
design a unique
[technology] index...”
Core technology exposure (i.e., FAANG)
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—Trevor Cummings, CIMA,
ETF Specialist, TD Asset Management
■ Actively managed ETFs seem to resonate with Canadians. Why is the demand for actively managed ETFs in Canada dispropor- tionately higher than in other major markets?
Fuhr: If you look at Canada, about 22% of ETF assets are in actively managed solutions. Globally, the number is 2.8%.2 That’s a very big difference, and part of that comes down to how ETFs are regulated. In Canada, ETFs are regulated just like mutual funds. So, advisors and clients appear to have the confidence and flexibility to execute their strategies using both ETFs and mutual funds together. I think Canadians often look at ETFs to play a similar role to that of mutual funds, and sometimes passive indices alone don’t always reflect what investors actually want and need to invest in to achieve their goals.
On top of Canada being the first to launch an ETF, there’s also been a lot of innovation in ETFs in Canada. It’s often not about the “wrap- per” of the ETF structure, it’s about the strategy inside of it, and
how investors use it. And I think Canadian ETF providers have been successful at expanding the boundaries and evolving to develop tools that advisors and investors can use.
■ How can ETFs help enhance advisors’ practices amid the massive intergenerational wealth transfer occurring in Canada?
Cummings: One of the industry’s tailwinds is that younger investors seem very receptive to ETFs and technological innovation in the financial sector. Younger investors are not only asking their prospec- tive service providers about ETFs, they expect their advisor to be proficient with them – it’s becoming one of those important boxes these investors want to see checked off. They may be needing advisors who can help them navigate the vast array of ETF solutions, in a forward-looking way.
Intergenerational wealth transfer represents both a great oppor- tunity and great risk to an advisor’s practice. So, it’s important to engage this next generation. ETFs can serve as a tool to do that. Here at TDAM, we are equipped to help advisors deliver key educational engagement to prospects, existing clients and the families of existing clients.
■ Considering current trends in technology and regulation, what opportunities do these represent for advisors?
McIntyre: ETFs represent an important enhancement to practice management when it comes to an advisor’s business. Technology has played a big factor in the ability of investors to access information. In the past, advisors may have focussed their practices on being
the supplier of that information to their clients. Today, these same clients have access to this information on their own. So, the type of communication that clients are having with advisors has changed. On the regulatory front, both in Canada and globally, there has been a focus on increased transparency in terms of fees, services an advisor provides and what clients are paying for those services.
As a result, we’ve seen a move from transactional advice, where advisors and clients are picking investments, into a more holistic view. Services like financial planning, estate planning, tax planning and behavioural coaching are how many advisors are articulating their value proposition as they move to a fee-based/discretionary model. ETFs have become a solution that advisors can use in this new model, whether it’s in discretionary portfolios or through tactical allocations. The other thing that we’re seeing is the ability for advisors to scale their business. Clients are getting older, demographics are changing, average account sizes are getting bigger. ETFs have become a vehicle that fits very well into a discretionary portfolio building model.
Gossack: I’ve had the opportunity to meet with advisors across the country over my career. In the past, we spent a lot of time on the top 10 stocks we had in certain funds, because the main perceived value
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“Advisors will continue to be needed as their practices evolve toward a holistic model, and ETFs can provide a great tool for their clients to reach their investment goals.”
–Jason McIntyre, CFA, Vice President, TD Wealth, Head of Advisor Distribution, TD Asset Management
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