Cheap ETFs put pressure on Canada: Toronto advisor

Canada will have to play catch-up to Fidelity Investments in the U.S., says one Toronto-based financial advisor

The pressure is on for Canada to play catch-up now that Fidelity Investments in the U.S. is offering the cheapest ETFs on the market, says one Toronto financial advisor.

“Any new product that comes out in the U.S. forces a rethinking in the Canadian market place,” says Chris Karram, partner with Safebridge Financial Group. “It certainly may put some pressure on those making the funds today in Canada.”

This sentiment comes on the heels of Fidelity's launch, last Thursday, of a suite of ETFs at an MER of just 0.12 per cent. Competitor, Vanguard, offers ETFs with MERs at 0.14 per cent.

At this stage, Karram says the announcement will have little impact on his dealings with clients. “The truth is, it’s not going to change the game overnight, but it has the ability to make a significant impact overall,” he says. “If it (the product) becomes available (in Canada), there will be clients that want to take advantage of that offering; those who are keen on minimizing fees and expenses.”

In the meantime, Karram says he will be looking into what Fidelity’s debut suite really has to offer. “It comes down to each client. Like any other product, there is no such thing as a one-size-fits-all,” he explains. “In today’s market, it’s not just about the cheapest. It’s more about what the value is ... and the cost to achieve it.” (continued.)


Another Toronto-based advisor, Victor Lamba of the Investors Group, agrees, but is not convinced Fidelity’s lower-fee offering will have such a deep impact on Canadian investors. He advises investors shift their focus away from lower MERs and consider the value of good advice.

“At the end of the day, even if you are paying MERs that are a little bit higher (percentage) through your financial advisor or planner, you have to think of what you’re getting,” says Lamba. “What investment advisors bring to the table is not only a product, but our knowledge and our expertise.”

Fidelity’s new offering includes (according to a prospectus filed with the SEC):
•    Fidelity MSCI Consumer Discretionary Index ETF
•    Fidelity MSCI Consumer Staples Index ETF
•    Fidelity MSCI Energy Index ETF
•    Fidelity MSCI Financials Index ETF
•    Fidelity MSCI Health Care Index ETF
•    Fidelity MSCI Industrials Index ETF
•    Fidelity MSCI Information Technology Index ETF
•    Fidelity MSCI Materials Index ETF
•    Fidelity MSCI Telecommunication Services Index ETF
•    Fidelity MSCI Utilities Index ETF
•    BlackRock Fund Advisors with subadvise the fund for Fidelity
•    Fidelity offered one ETF, the Nasdaq Composite Tracker Stock

What impact do you think Fidelity’s low-fee ETFs will have on Canada? Tell WP your thoughts in the 'comments' section below.