There are now more than 1,900 ETFs on offer in Canada, so advisors need to focus on products that will benefit clients.Koutaro nakazato/iStockPhoto / Getty Images
As do-it-yourself investors turn to exchange-traded funds in droves, product manufacturers have noticed, launching products that target self-directed investors.
With more ETFs aimed at DIYers, where does that leave advisors?
After strong growth in 2025, DIY investors hold a greater share of ETF assets under management (AUM) than advisors do, according to data from Toronto-based Investor Economics, an ISS Market Intelligence company.
There are now more than 1,900 ETFs on offer in Canada, so advisors need to cut through the noise and focus on products that will benefit clients, fund experts say.
ETF AUM rose to $714-billion last year, up from $519-billion in 2024. While DIY investors are driving much of that growth, Prerna Mathews, vice-president of ETF product strategy at Mackenzie Investments, says more advisors are also turning to ETFs as their businesses evolve and clients seek lower-cost investments.
“There are three key drivers influencing advisors to adopt more ETFs, and it comes down to product offerings, the regulatory environment and demographic changes,” she says.
The upcoming total cost reporting changes, which will give investors more information about the fees they pay, have advisors favouring lower-cost ETFs, she says, especially with younger clients.
More sophisticated ETFs give advisors more options to solve specific challenges for their clients as they construct portfolios, she says.
“Maybe it’s managing volatility, generating income, capital preservation – there’s just more on offer, which is a good thing for advisors to have those tools.”
While ETFs began as passive investments that tracked certain indexes, about 50 per cent of flows and two-thirds of the 374 funds launched last year were active funds such as covered-call, single-stock and leveraged ETFs, says Andres Rincon, managing director and head of ETF sales and strategy with TD Securities Inc.
While more DIY investors are getting into actively managed funds, typically those funds are focused on advisors, he says.
“Because there are so many products coming online now, you can get most of your alpha and active strategies in ETFs,” he says, in addition to index strategies.
Thematic ETFs that target a certain sector or industry, such as artificial intelligence or technology, for example, are popular with DIYers, but “we’ve seen a lot of advisors adopt some of these products because their clients want it,” Mr. Rincon says.
“We’ve seen a lot of advisors not just simply allocate to a big issuer for most of their beta, but they’re also [using] more tactical, systematic ETFs because their clients care.”
But with so many new products backed by sales teams, advisors can get lured into shiny, new actively managed specialty and thematic ETFs just like retail investors, says Benjamin Felix, chief investment officer and portfolio manager at PWL Capital Inc., adding that this may not serve the long-term interests of clients.
He says advisors should be using ETFs to build low-cost, broadly diversified portfolios.
“But based on the products that exist and based on the assets that are flowing into those products, it seems like that’s not what’s happening.”
Mr. Felix is critical of many new ETFs on the market, including thematic, buffer, single-stock and covered-call ETFs, calling them “ETF slop.” He says many of these funds don’t perform as well as the underlying securities and appeal to different investor biases.
“When those new products are interesting and exciting, it’s hard to resist, in many cases, especially when they’re appealing to the end client,” he says.
Instead, advisors need to have a specific strategy for their clients and narrow their focus.
“If you come to that problem with an investment philosophy, you can very quickly filter out a lot of products,” he says. “If you don’t have a philosophy – if you’re just trying to sort through that whole list – it’s really, really hard to decide what to invest in.”
Tools for advisors
Ms. Mathews says that as many advisors broaden their services to include wealth, estate and tax planning, more are becoming asset allocators and using ETFs to customize client portfolios.
For example, instead of buying a broad global fund, advisors can drill down into niche equity ETFs targeting the U.S., international and emerging markets, she says, and use collateralized loan obligation ETFs and liquid alternative strategies to diversify portfolios.
In the past few years, Mackenzie has launched quantitative ETF strategies that target advisors.
“This has long been an institutional offering on our shelf, but we brought it to market for advisors, and it’s been incredibly successful,” Ms. Mathews says.
Advisors are also using model portfolios that are generated internally by their company’s research teams that lay out the firm’s asset allocation view, Mr. Rincon says, and those research teams can also help advisors sift through the array of ETFs on offer.