1. The Growth of ETFs and the impact to the Financial Services Industry
Pat Dunwoody
Executive Director, CETFA

2. The Global ETF Landscape

3. The Canadian ETF Landscape

4. The Evolution of Innovation in the ETF Marketplace
Simple Beta
Equal Weight, Sector, etc.
Actively Managed
Factor
Beta

5. Predicted Future Growth Globally
1. PwC Global, 2nd Annual Global Exchange Traded Funds (ETFs) Survey , “ETFs: A roadmap to growth” (2016)

6. Projected Growth of Mutual Funds and ETFs

7. Trends in dollars going to ETFs and where new dollars are going
73:1
38:1
12:1

8. Difference between ETFs and Mutual Funds
ETFs
Mutual Funds
Access
Units bought and sold through a brokerage service
Units bought and sold through the fund manager or a broker/dealer
Pricing
Unit prices set by the market throughout the day
NAV at the end of the day
Asset-Weighted MERS
Canadian Equity 0.30%
Canadian Bond 0.27%
Equity %
Canadian Bond 0.64%
Fund Transaction Costs
Brokerage commissions and bid-ask spreads on each direct purchase and sale
None if the sale or buy is done directly with the fund.
Depending on the class of shares purchased (DSC,LSC, FE)
Dividend Reinvestments
Availability depends on the fund sponsor and broker – and there may be a charge for the service
Available at no cost
Clients Service
Provided by the broker
Provided by the broker and the fund manager

9. Significant drivers of ETF growth
PwC 2016 ETF Survey
80%
75%
72%
70%
70%
69%
70%
60%
54%
53%
51%
50%
42%
40%
36%
30%
20%
10% 0%
Product benefits
Adoption by institutional investors
Adoption by advisors and individual investors
Penetrate the retirement market
Education on ETFs
2015
2016

10. Trends in Canadian ETFs
Fixed income ETFs are increasingly being used by investors for portfolio construction
Net cash flows have changed month to month in different types of ETFs, further illustrating the use of ETFs to manage risk
Solutions based ETFs are also common in Canada with products such as covered call strategies, bond and preferred share ladders
Similar to the U.S. and Europe, smart beta ETFs continue to gain traction in Canada and many of the new ETFs are true active funds
ETFs are typically first movers for market trends

11. Improving Investor Trust and Confidence
According to the CFA Society of Toronto - The most important actions firms can take to improve investor trust and confidence

12. The Future of ETFs
The line between passive and active will become more blurred
As is the line between mutual funds and ETFs
Innovation will continue to grow and address the varying needs of investors
Greater penetration in ETF users
Greater number of providers: Dec 2015 – 12, Dec 2016 – 18 and at the end of August there are 24
Price competition on traditional market capitalization weighted products
Additional lines of distribution – robo advisors, MFDA
Continued growth in the use of ETFs in pension and other institutional investing
Sub-advising has grown

13. Current and Future Regulatory Changes
MFDA access – the ability for MFDA firms to sell ETFs
ETF Fact Form - will be required to be sent post trade
Risk Ratings – changing to average Standard Deviation over a 10 year period
Tax Update – most are identical to mutual fund issues
CRM2 - any impact was neutral tending to negative
Embedded Commissions – there are only 2 ETF Providers left that offer
Fee based accounts – for growth to accelerate fee-based accounts have to be the norm

14. Canadian ETF Association
2017 Activities – remaining
October 24th Breakfast - ESG: The Future of Investing
2 University Roundtables – Toronto and London
An updated Web Site with a Job Board
2018 Activities
4-5 Conferences across the country
4 Breakfasts on targeted subjects
Webinars when needed
More detailed and “user-friendly” statistics
Additional social media and print media articles

15. Thank you Pat Dunwoody patdunwoody@cetfa.ca 416-260-4714
This CE activity has been approved by FPSC® as meeting the minimum requirements for CE Approval as outlined within the FPSC Continuing Education Guidelines. The views and opinions expressed in this presentation are those of the presenter/content author and do not necessarily reflect the views of Financial Planning Standards Council (FPSC).