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“Advisors will continue to be needed as
funds, because the main perceived value advisors brought to clients was security selection. These days, there are so many more demands on an advisor’s time, from identifying the right solutions for clients to ensuring there’s continuity between gen- erations. An ETF represents one of many solutions that can allow advisors to focus more of their attention on their businesses and on their clients.
■ Where do you see alternative strategies heading in the ETF space, both in terms of investor demand and new products on the market?
Gossack: Many alternative products, such as leveraged solutions, commodities and infrastructure, were once only available to high net worth individuals or pension plans. It’s been part of the natural evolution of ETFs, as a democratic investment structure, to allow everyone to access these strategies. As the num- ber one Canadian pension manager, as measured by Canadian pension assets under management,3 and the recent acquisition of a well-known alternative investment firm, TDAM is well positioned to offer such options to clients.
As previously mentioned, ETFs have been regulated in the same way as mutual funds. In the past, leverage hasn’t been permitted, but we’ve since seen some easing of these rules. That has allowed the industry to introduce new infrastructure and real estate solutions – at TDAM, we’ve launched TD Active Global Infrastructure Equity ETF (TINF) and TD Active Global Real Estate Equity ETF (TGRE). Alternative ETFs allow us to create tools that can help solve for various investor goals.
Fuhr: In the alternatives market, real estate solutions have been popular. In today’s interest-rate environment, clients have been looking at other ways to get income. This is happening globally, and this has been echoed in Canada as well.
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
■ 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 reg- ulatory 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 finan- cial 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
■ ETFs have cemented themselves as an integral part of the investment landscape. From an advisor’s perspective, what role can ETFs play alongside other types of investments in a client portfolio?
McIntyre: We should think of ETFs like mutual funds, as in they are just
vehicles that allow you to access different types of investments. They are not the actual investment strategies, and by themselves they’re not the complete solution. 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. From TDAM’s perspective, supporting advisors is critical. I think there’s a great opportunity for us to work together and continue to expand the existing levels of ETF knowledge of clients. This can include the mechanics of ETFs, trading and liquidity and tax strategies. So, while TDAM is proud to have a diverse product shelf, we also want to continue to build the educational component to support advisors.
For example, I think there’s an opportunity to educate advisors and investors about the best practices of trading to lower some of the investment costs. Initially, we give three simple rules. The first: don’t trade in the first 15 minutes or last 15 minutes
of the trading day. The second: use a limit order and not a market order. This
minimizes the chance you’ll be negatively impacted by wild swings and markets and the underlying investments. By providing that limit order, it can potentially lower the cost of ownership of ETFs. And the third: connect with our team at TDAM. There may be times you don’t see all of the liquidity issues on your screen, and if you’re trading in large volumes, it’s even more important to get the best price. TDAM can help ensure you get the best execution, which can help ensure you’re trading in ETFs in the most cost-effective way.
TDAM is committed to helping advisors grow their practices in today’s markets, utilizing ETFs plus mutual funds, individual investments and other solutions. For more information on ETFs and how they can help enhance your business, view TDAM’s webinar4, or contact a TDAM wholesaler.
1. ETFGI: data sourced from ETF/ETP sponsors, exchanges, regulatory filings, Thomson Reuters, Thomson Reuters Lipper, Bloomberg Finance L.P., publicly available sources and data generated in- house, as of May 31, 2020.
2. ETFGI: data sourced from ETF/ETP sponsors, exchanges, regulatory filings, Thomson Reuters, Thomson Reuters Lipper, Bloomberg Finance L.P., publicly available sources and data generated in- house, as of May 31, 2020.
3. The Top 40 Money Managers (as of December 31, 2019), Benefits Canada, May 2020. 4. Credits available from: IIROC, FP Canada and The Institute.
For more information on TD ETFs, please visit TD.com/ETFs Twitter: @TDAM_Canada LinkedIn: TD Asset Management
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Source: TD Asset Management, Bloomberg Finance L.P., as of June 30, 2020.
The information contained herein has been provided by TD Asset Management Inc. and is for information purposes only. The information has been drawn from sources believed to be reliable. Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. Certain statements in this document may contain forward-looking statements (“FLS”) that are predictive in nature and may include words such as “expects”, “anticipates”, “intends”, “believes”, “estimates” and similar forward-looking expressions or negative versions thereof. FLS are based on current expectations and projections about future general economic, political and relevant market factors, such as interest and foreign exchange rates, equity and capital markets, the general business environment, assuming no changes to tax or other laws or government regulation or catastrophic events. Expectations and projections about future events are inherently subject to risks and uncertainties, which may be unforeseeable. Such expectations and projections may be incorrect in the future. FLS are not guarantees of future performance. Actual events could differ materially from those expressed or implied in any FLS. A number of important factors including those factors set out above can contribute to these digressions. You should avoid placing any reliance on FLS. Commissions, management fees and expenses all may be associated with mutual fund and/or exchange-traded fund (“ETF”) investments (collectively, “the Funds”). Trailing commissions may be associated with mutual fund investments. ETF units are bought and sold at market price on a stock exchange and brokerage commissions will reduce returns. Please read the fund facts or summary documents and the prospectus, which contain detailed investment information, before investing in the Funds. The Funds are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer and are not guaranteed or insured. Their values change frequently. There can be no assurances that a money market fund will be able to maintain its net assetvalueperunitataconstantamountorthatthefullamountofyourinvestmentwillbereturnedtoyou.Pastperformancemaynotberepeated. TDETFsaremanagedbyTDAssetManagement Inc., a wholly-owned subsidiary of The Toronto-Dominion Bank. Bloomberg and Bloomberg.com are trademarks and service marks of Bloomberg Finance L.P., a Delaware limited partnership, or its subsidiaries. All rights reserved. All trademarks are the property of their respective owners. ® The TD logo and other trademarks are the property of The Toronto-Dominion Bank or its subsidiaries.
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