Getting ahead of the ETF curve

Getting ahead of the ETF curve

Getting ahead of the ETF curve For the vast majority of Canadians, when it comes to investment funds and the fees tabbed onto them, there is a lack of understanding around costs even when there's a 1.5 per cent gap in fees.
While all investors have heard mutual funds largely mirror ETFs, many still fear those relatively new offerings to Canada. That’s mostly because of a lack of knowledge.
But a growing number of advisors are leading the charge to break through that ignorance and better connect clients with a low-MER alternative. Transactional advisors are among that group, trying to get ahead of the curve. Although fee guys are undoubtedly the chief proponents.
“We have chosen to focus on strictly using ETFs for client portfolios because they are a pre-diversified group of securities, so they are already risk-dampened. An individual can put them together and get an institutional-like portfolio at a much lower cost," says Mike Yamada, president and CEO of Pur Investing in Toronto.
John Tabet, senior financial advisor with Industrial Alliance Securities Inc. in Oakville, Ont. agrees and his firm uses ETFs for exactly that reason.

“Being fee-based advisors, ETFs fit into a fee-based strategy because they allow us to lower cost to the underlying client,” he tells WP. ETFs make up about 30-40 per cent of the firm’s client portfolios.
With CRM implementation chugging along, “it will be transformative for the industry,” he says.

Transparency is also another benefit of ETFs over mutual funds, argues Yamada. (continued)

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  • Kevin O'Brien 2014-04-29 1:14:20 PM
    As with all investments do your due diligence Some are comparing apples and oranges. With an ETF you are buying an index...does anyone know what happened to the Canadian index when Nortel dropped? or 2008? If you owned the index you lost permanently.
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  • Sean Straughan 2014-04-29 2:02:06 PM
    Most of the negativity being directed towards the use of ETF's for long term investing seems to be coming from Mutual Find companies, who are seeing their share of the fee wallet shrinking or from transaction based advisor's who can't DSC ETF's. I agree with Kevin, do your research. I am sure a number of mutual fund managers were in love with Nortel and could not sell their shares fast enough to exit. If a mutual fund is too large, I have been told it can take up to 240 days to clear a position fully.
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