The amount of ETF assets in Canada surpassed the half-trillion-dollar mark in 2024, with $517-billion invested across 45 ETF providers,Spencer Colby/The Canadian Press
In a sign that Canadians are making more of their own investing choices, do-it-yourself investors may soon hold a majority of exchange-traded fund assets, after decades when brokerage clients with advisers dominated ETF ownership.
The amount of ETF assets in Canada surpassed the half-trillion-dollar mark in 2024, with $517-billion invested across 45 ETF providers, as of Nov. 30, according to data provided by National Bank Financial. That includes more than $65-billion of new money coming into the industry in the first 11 months of 2024.
“A large part of that momentum is due to the growth of DIY investing,” said Rohit Mehta, chief executive officer of Global X ETFs Canada. “We’ve seen more and more Canadians motivated to participate in the recent bull market, especially through ETFs, as a way to simplify and improve their investing experiences and access asset classes and strategies that historically weren’t available to them.”
Now, as the year end approaches, the industry can see the tipping point for ETFs as the amount of money DIY investors are piling into the funds is creeping closer to the total assets held by investors who rely on financial advisers for purchases – marking a major shift in demand toward the lower-cost funds.
In the first nine months of 2024, ETF assets in the discount brokerage channel grew by nearly 52 per cent, largely driven by DIY investors purchasing funds, according to a recent report by Toronto-based Investor Economics. ETF Assets held in full-service brokerage accounts grew by only 31.5 per cent.
About $174-billion of ETF assets are currently held at full-service brokerages, as of Sept. 30, according to Investor Economics, while another $173.2-billion of ETF assets are held in online discount brokerages. That is up from the $114.2-billion that DIY investors held a year prior.
Part of that growth is coming from the boom of younger generations starting to invest on their own through digital channels, said Carlos Cardone, senior managing director at Investor Economics. People with small investment portfolios are also finding it harder to get access to full-service advisers.
“People are generally now more comfortable doing things online. But also, following the [COVID-19] pandemic, it has become a little bit harder for a lot of people to get financial planning and advice from an adviser,” Mr. Cardone said in an interview.
Advisers have been moving a “little bit upmarket” in terms of the clients they want to cater to, Mr. Cardone said. “Before the pandemic, it was easy to talk to an adviser for some financial planning advice when you had about $100,000 to $150,000,” he said. “That is not the case any more.”
Mr. Cardone says that threshold has now jumped to $200,000 to $250,000 in investable assets. That means, he said, that even within the bank branch channels, investors are being directed to open online brokerage accounts.
“What you see over the last couple of years, particularly over this last year, is that online discount brokers had seen tremendous growth for pretty much absolutely every single product, including ETFs,” he added. “Everything is growing in online brokerages because more accounts, more people, more dollars and more transactions are going in that direction.”
Linda Ma, an ETF research analyst with National Bank, said ETF sales for the first 11 months of 2024 already surpassed the annual record set in 2021 – when $53-billion flowed into ETF assets as the pandemic took hold.
Continued ETF growth in Canada can be largely attributed to the strong demand for U.S equity ETFs, which saw $18.8-billion in sales, as well as asset-allocation ETFs, Ms. Ma said in an interview. Asset allocation ETFs – which provide diversified portfolios of stocks and bonds that automatically rebalance to stay in line with an investor’s risk profile – accounted for $9.7-billion in sales in 2024 through November.
“Both of these two categories are appealing to DIY investors since they are time-tested investment strategies that are delivered in a transparent, ultralow-cost investment vehicle,” Ms. Ma said.
Asset allocation ETFs, she added, have been popular with investors since 2019, when the funds entered Canada.
“The category has not seen a single month of outflows in the past five years, even in the toughest market environment in 2022,” Ms. Ma said.
Since the Vanguard Group introduced asset allocation products to the Canadian market in 2018, the funds have exploded in growth to about $31-billion in total assets in Canada.
Sal D’Angelo, head of product at Vanguard Canada VCE-T, said the strong growth in asset allocation funds is largely driven by retail investors who are seeking lower-cost options for globally diversified portfolios.
“They are a compelling offer for retail investors who understand the importance of cost on long-term investment returns,” Mr. D’Angelo said in an interview.