Canadian investment advisors expect a 50% increase in their allocation to ETFs over the next two years, finds a new survey of 150 advisors by Evolve ETFs.
The five main reasons are:
- low fees (72%);
- the ability to capitalize on specific themes (64%), including blockchain and AI, cannabis and cybersecurity, among others;
- more liquidity (58%);
- transparency (57%); and
- having a relationship with a fund issuer (41%).
The average book size of the advisors surveyed was $100 million to $250 million, and their clients were aged 45 to 65 years old, on average. More than half of the advisors’ books (60%) were fee-based, while 21% of their assets, on average, were in ETFs. Only 2% of those surveyed didn’t use ETFs.
One theme that has yet to catch on in the ETF space is responsible investing, the survey shows. While nearly 35% of advisors say RI considerations factor into their decision-making, 54% say it doesn’t. About 11% aren’t sure how to approach it.
But, “more advisors are using active ETFs versus passive,” the survey says, despite “only 20% of Canadian ETFs assets [being] active.” This suggests the drive for passive funds may come mainly from institutional investors.
For most of the advisors surveyed (93%), an active approach is most important when investing in small-cap equity ETFs versus mid- (83%) and large-cap equity funds (33%). In the fixed income ETF space, active approaches were most appreciated in the high yield space (81%), and when funds invested in preferred shares or senior loans (62% and 63%, respectively).
The advisors surveyed do their homework, with their top source for information being fund issuer websites. Almost 80% “pick their own ETFs versus using their recommended lists (24%) or proprietary models (14%),” says the Evolve ETFs survey.
However, due to incoming regulations and burdens, the firm expects “the importance of recommended lists and models to increase over coming years.”