How do you use ETFs in client portfolios?

By Maddie Johnson | March 14, 2022 | Last updated on March 14, 2022
2 min read
portfolio construction chart / Denis Novikov

This article appears in the March 2022 issue of Advisor’s Edge magazine. Subscribe to the print edition, read the digital edition or read the articles online.

Linda Shick Linda Shick

Portfolio manager, Family Wealth Counsel Advisory Group, Raymond James Ltd., Toronto

We use ETFs in almost all of our client portfolios, and certainly in our discretionary portfolios. We typically use ETFs in two different ways. First, depending on where the markets are, we will use a sector ETF if we believe there is going to be outperformance in a sector. We typically don’t use broad-based ETFs.

We also use covered-call ETF strategies for income. In high-flying markets or markets that are well-valued, we use a covered-call ETF on a sector. This allows us to increase our income stream if we think a sector is going to be mediocre. The covered-call strategies we use would be incredibly complex for us to actually trade, so we are happy to pass the management off to somebody else.

Robert Taylor Robert Taylor

Senior financial advisor, Assante Capital Management Ltd., Halifax

How I use ETFs in client portfolios depends on what the client is looking for — no one ETF fits all. If a client wants a low-cost portfolio, then I use passive ETFs that are low in fees. If a client wants a thematic investment, like 5G exposure or self-driving cars, I use an ETF to drill down their investment to a specific theme. I also use ETFs for complementary asset classes: for example, a growth ETF paired with a value fund. As ETF manufacturers bring more products to the marketplace, we have more tools to accomplish client goals.

I would say the average retail client still misunderstands ETFs. A lot of clients think ETFs simply mean “cheap.” That might have been the case 15 years ago, when index ETFs were becoming popular, but they are so much more than that now.

Lisa-Marie Winning Lisa-Marie Winning

Principal and executive consultant, Winning & Associates, IG Wealth Management, Burlington, Ont.

I don’t hold individual ETFs. I use them as part of professionally managed solutions. I take this approach rather than building my own ETF portfolio because I am a holistic financial planner, so my job is to address all aspects of a client’s financial picture. I rely on well-known, professional money managers to look after components of the portfolio for my clients, and my job is to make everything complement each other.

I have exposure to Canada, the U.S. and international markets through ETFs. One of the benefits, in addition to broad market access, is the cost-reducing element. ETFs provide strategic weighting to passive exposure in equity markets. It’s a really simple approach to obtaining proper diversification and does it in a way that reduces costs for a client.

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Maddie Johnson

Maddie is a freelance writer and editor who has been reporting for since 2019.