Your client tells you he’s leaving to invest in exchange-traded funds on his own. What do you say?

For Jim Steel, president of Ottawa-based Polaris Financial, the immediate answer is more nuanced than “Here is why you should stay,” and depends on a careful evaluation of the client.

“If you have someone who truly does not need your services, then you do not need to create a need for them,” he says.

Steel speaks from experience. He spent several years coaching a major client on ETFs, only to have the person decide he wanted to go out on his own.

“At first I was upset because I was losing a big account, but when I stopped to think about it, it was clear to me he knew what he was doing,” says Steel, whose approach paid off when the former client referred several new clients to him.

But in most cases, the advisor will feel it necessary to maintain the relationship. Advisors point to several key strategies that have helped them keep clients in the fold amid growing interest in ETFs, a trend that’s expected to continue.

Despite the perception of ETFs as accessible to individual investors, advisors can continue to make a strong case for maintaining a role in their clients’ ETF portfolios.

Even with the supportive press for ETFs as a panacea for investor ills, the majority of ETF investments are still in the hands of advisors, not individual investors.

This reinforces the need for advisors to be equipped for conversations with clients who see ETFs, due to their ease of use and lower cost of trading, as a way to save management fees and go solo.


A conversation that starts with a client expressing interest in going-it-alone can, with the right strategy, become a discussion of the client’s goals and motives; and how those best fit within an advisor-client relationship.

Your response to the client must be customized to the client’s motives. Listen to what they have to say and be open to a variety of outcomes, from maintaining a full relationship to playing a smaller role helping the client select investments.

“I find out what it is they’re focusing on,” Steel says. “If they’re focused on fees, then I’ll talk about fees. If they want value over growth, then I’ll focus on that.”

You also have to walk the client through the realities of investing on his or her own. If you’re working with time-challenged professionals, point out that once the novel intellectual challenge of selecting investments wears off, they’ll be down to the week-in, week-out grind that is the reality of life in the investment trenches. And then there’s the risk of navigating difficult markets. Most professionals will reach the conclusion that going it alone isn’t worth the time or the risk.


An advisor who offers a wider range of services, such as tax planning, risk management, insurance and estate planning, can make a strong case that the client’s needs are best served by staying in-house.

“If they are looking solely at ETF versus mutual fund, and that’s all the broker is doing, buy this versus that, then there’s not a whole lot of value added,” says Tom Trainor, managing director of Hanover Private Client Corp and past president of the Toronto CFA Society. “But if they’re spending a lot of time helping them structure the portfolio, tax planning, risk management and other issues, then there’s a real conversation you can have with them.”

Advisors say that managing tax issues for clients is especially valuable in retaining those who want neither to handle tax issues on their own, nor pay someone else to do it for them.

The cost issue can often be resolved when clients see the level of work and time required to save themselves the management fee