Offer cash alternatives to clients

Due to ultra-low interest rates, investors with assets in cash are seeking alternatives that offer better returns.

Read: Investors question the value of cash and Safest looking route not always best

One option they can consider is investing in “cash-like” ETFs, say National Bank analysts Pat Chiefalo, Daniel Straus and Ling Zhang. They say they offer many of the advantages associated with cash, which include:

Liquidity: ETFs can be sold in the market at any time during the trading day, with no penalty for early withdrawal or lock-up period, as in some cash alternatives such as GICs.

Yield: As cash earns a level of interest, these ETFs pay an interest rate that may be slightly higher than a cash deposit account, in the form of monthly distributions.

Low duration risk: ETFs that pay out floating-rate distributions or that have low portfolio duration help minimize interest rate risk.

Minimal counterparty risk: ETFs offering very high investment grade exposure have a risk level comparable to that which investors face on cash deposits in excess of the $100,000 amount protected by CDIC insurance.

Read:

Educating clients on ETFs

Low yield drives sales of low-cost ETFs

Pension investing with ETFs

ETFs providers engage in price war