After the release of a recent BlackRock ETF survey, which revealed that nearly one-third of Canadian investors now own ETFs, we caught up with Head of iShares at BlackRock Canada, Warren Collier, to discuss the findings and ask about the industry trends that are driving the growing Canadian appetite for exchange traded funds.
“There is one theme that has been the overall driver of ETF growth from the beginning: the way they democratize investing through cost efficiency, transparency and flexibility,” Collier says. “Certain investment strategies or exposures used to only be available to investors of institutional size, but, because of the ETF structure, any investor can get that exposure now.”
ETFs’ growing popularity can also be attributed to their ability to provide exposure to specific sectors, asset classes, countries, and broad markets. “ETFs are also increasingly used for getting fixed income exposure,” Collier says. “As the liquidity of fixed income markets across the developed world has dried up, we’ve seen the next step in the democratization of investing through what is commonly called smart beta, but particularly focuses on factor investing.”
The survey also found that ETF growth is expected to continue in 2017. In fact, 93% of ETF owners and 38% of non-owners confirmed an interest in purchasing ETFs in the next 12 months. Momentum in ETFs is clearly growing, but what does this means for the mutual funds market?
“It doesn’t necessarily mean anything,” Collier says. “The survey demonstrates that the primary source of funds for investors looking to invest in the next 12 months is cash. ETF users already have a lower exposure to cash, and for people thinking about putting cash to work, the ETF is a structure that they’re looking at.”
The survey also discovered that 52% of Canadian investors plan to learn more about ETFs next year, and Collier believes that advisors will play an integral role in providing this education. “Firstly, advisors should be working to understand the ETF products on offer, because there is a huge opportunity for them to realize on the Canadian interest,” he says. “There is a real opportunity for advisors to build their businesses by positioning themselves as educators around ETFs. It’s going to become an increasingly essential part of their job, rather than just a value add.”
“If you’re going to be a good advisor, you need to be able to explain how the products best work, how they’re best utilized in portfolios and how they sit alongside individual stocks and mutual funds.”
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