Most Canadian investors are unfamiliar with exchange traded funds, but advisors have an opportunity to get them interested in these increasingly popular investment tools, a recent survey from BMO Investments Inc. suggests.
In a survey of 1,520 Canadians conducted by Leger Marketing on behalf of BMO Investments in November, only 18% of respondents said they’re familiar with ETFs.
However, three-quarters of survey participants – after being told of the benefits ETFs have to offer – said they would consider adding them to their investment portfolios.
“Although ETFs have been around for only 20 years, they’re gaining in popularity and we believe they are poised to take off in Canada,” said Serge Pépin, head of investments at BMO Investments Inc. “Investors value the various benefits that ETFs have to offer, including lower costs, transparency, tax efficiencies, investment flexibility and diversity.”
The main barriers preventing Canadians from investing in ETFs include:
- not knowing how to get started / lack of knowledge;
- uncertainty around how to integrate ETFs into a portfolio; and
- not having the time or expertise to choose individual ETFs.
“Being a relatively new investment option, it’s only natural that many investors remain unsure how to effectively integrate ETFs into their investment portfolios,” said Pépin. “Many are attracted to ETFs, but a lack of knowledge may make them hesitate when adding them to their investments.”
This suggests that clients would likely welcome the opportunity to learn more about ETFs from their financial advisors. Advisors could play an important role helping clients understand how ETFs work, how to incorporate them into a broader portfolio, and which ones are best suited to the client’s investment objectives.
Investors appear to be much more familiar and comfortable with mutual funds than ETFs. Almost two-thirds of the survey respondents indicated that if they could get all the advantages of ETFs in the form of a mutual fund that is managed by a financial professional, they would be more likely to add them to their portfolio.