There are many reasons why relatively few Canadian investors use ETFs compared with actively managed mutual funds. There’s about $900 billion in mutual funds in this country, while ETF assets total about $60 billion—just over 6% of the total. One of the main reasons for that yawning gap is that most advisors in Canada are licensed to sell mutual funds, but not ETFs. But that may be about to change.
The Canadian ETF Association (CETFA), an industry group that represents the country’s ETF providers, is spearheading an effort to enable mutual fund advisors to offer ETFs to their clients ETFs.
Here’s the crux of the issue. Investment advisors in Canada can be licensed by either the Mutual Fund Dealers Association (MFDA) or the Investment Industry Regulatory Organization of Canada (IIROC). MFDA advisors—many of whom work at bank branches and firms such as Investors Group—can sell mutual funds and nothing else. Only those who are IIROC-licensed can recommend and sell individual stocks or ETFs. Up-to-date numbers are hard to come by, but a 2012 report from Advocis suggests MFDA advisors outnumber their IIROC counterparts by about four to one.