ETF market: Challenges and opportunities

Canadian-listed ETFs attracted $7.6 billion in investments in 2011, a 13% year-over-year increase. The global ETF industry is growing even faster, at nearly 25% a year.

As is often the case, this kind of growth comes with attendant consequences and new challenges, including client communication.

Growing market share, proliferation of products and increasing complexity are all bound to trigger regulatory concerns over investor safety.

Contrary to popular belief, most ETF investors are not of the DIY variety, but are still working with advisors. Financial advisors must be able to explain how they work, and what the risks are.

ETF firms under scrutiny The exchange traded fund industry has enjoyed explosive growth, thanks to its promise of low-cost exposure to an ever-widening array of underlying assets. But there are fears that this growth may be outpacing the ability of regulators to keep up with the risks associated with the products.

Canadians find ETFs confusing While many Canadians remain unfamiliar with ETFs, the more they learn about them, the more interested they become, according to one provider of the product.

A screw is not a nail Products may appear similar, but aren’t. Some ETFs that employ derivatives are receiving critical press and regulatory scrutiny, so we’re examining them in this series.

Safety tips for synthetic ETF use Derivatives offer useful and cost-effective ways for investors to manage risks. In the ETF world, derivatives have democratized investor access to asset classes like commodities and currencies, and to strategies like covered-call writing, use of leverage and short selling.

ETFs to soar in 2012 Canada’s exchange traded fund (ETF) industry is set for dramatic growth and change in the coming year, according to the Canadian ETF Outlook 2012 report issued today by BMO Asset Management.

ETF sales climb in 2011 Despite continued market volatility through the final quarter of 2011, Canadian-listed exchange traded funds posted net sales of nearly $3 billion, according to the Canadian ETF Association (CETFA).

Keeping ETFs, and clients, in-house Your client tells you he’s leaving to invest in exchange-traded funds on his own. What do you say?

Are MFDA advisors missing out on ETFs? The growth of ETFs has reinvigorated the debate over the merits of MFDA and IIROC licensing, and more specifically whether an MFDA-licensed advisor can adequately access the fast-growing sector.

Earn free CE credits!

• An in-depth look at ETFs, part 1
• An in-depth look at ETFs, part 2
• The Place of ETFs in Portfolio Allocation and Diversification

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.