Key factors to successfully harness ETFs and grow the business

At the RETAIL BROKER SUMMIT, hosted annually by Recognia, leaders in online brokerage and Exchange Traded Funds (ETFs) came together to discuss how we might harness this abundant asset category and move it forward for mutual benefit with investors. 

I could give you my own play-by-play, but I'll do one better and offer you the formal write-up from a third-party perspective i.e. our friends at EXT Marketing. But I've thrown in some additional links and references for good measure.


Amelia Young, Principal, Upside Consulting Group Inc., moderated a lively panel discussion including:

A crucial part of the self-directed space, exchange-traded funds (ETFs) have exhibited tremendous upside potential, with double-digit growth in countries across North America and Europe. In the U.K. alone, ETF users grew 30% in 2012-2013, and 20% the following year. This unprecedented growth can largely be attributed to ETFs’ ability to provide instant diversification and their widespread use as a cost-effective replacement for other financial vehicles (mutual funds, bonds, stocks). Another key growth differentiator is ETFs’ unique ability to deliver access to precise markets and various investing themes, such as cybersecurity, which mutual funds have not been able to deliver.


Industry studies have found that ETF users skew both younger (under 35) and older (over 65), while those aged 35-65 have less ETF exposure in their portfolios. Data also indicates that ETF users remain largely male, and that Millennials continue to be a key demographic in the self-directed channel.


It’s critical that investors have a fuller understanding of ETFs, and how ETFs fit in their portfolios. Unfortunately, studies indicate that the current level of ETF knowledge is strikingly low, with a Fidelity study finding that just 13% of self-directed investors consider themselves knowledgeable about ETFs. The reality is that many clients don’t even know they have ETFs in their portfolio because they’ve been included in their “wrap” product holdings. Consequently, it’s imperative that educational tools continue to evolve so that investors have the knowledge they need to invest confidently.


  1. Be Proactive. It’s important for retail brokers and ETF providers to reach out to investors in a variety of settings – and to not assume that they’re going to come to you.
  2. Third-Party Sites. Making research available at sites like Morningstar, and is crucial to building an informed base of ETF users.
  3. Positioning is Key. Despite the clear need for education, many busy investors have been reluctant to avail themselves of the various educational tools available. Industry experts are finding that “bite-sized” videos and other quick tips are effective ways to engage investors who may be unwilling to download more comprehensive tools, like PDFs.
  4. Too Many ETFs? One challenge that still needs to be addressed is the confusion among investors caused by the sheer volume of ETF offerings. While smart-beta, commodity and leveraged ETFs clearly serve a purpose, there is a real danger that investors are being overwhelmed (and ultimately turned off) by having too much choice.

With the ETF "choice overload" problem, online brokers and ETF providers may start to think about design patterns that make choosing easier for investors. This TED Talk by Sheena Iyengar focuses on the need to "cut and categorize".

How to make choosing easier


Impending Regulation. While it’s not entirely clear how CRM2 will affect the investment landscape, there is the potential that many Canadian investors will be displaced by advisors and end up on self-directed platforms. If self-directed investors are unable to access advice as a result of financial regulations, there is a danger that many will simply sit on cash. It’s imperative that the industry works hand-in-hand with regulators to help investors achieve the outcomes they require.

[More information on CRM2 from The Globe and Mail: Here's what your fund fees, performance will look like under new guidelines]

If CRM2 gives investors sticker shock from advisor fees, their possible move to self-directed platforms underscores the need to safeguard industry reputation and educate on trading costs

Safeguarding Reputation. The “Flash Crash” of August 24th was acutely felt in the ETF space, particularly in the form of pricing issues. While clearly a market structure issue, the complexity of the topic increases the likelihood of misinformation and, by extension, has the potential to tarnish the industry’s reputation. The events of August 24th clearly underscore the need for additional education – not just about ETFs, but about trading costs in general. The fact that so many ETF investors are still relying on market orders is a clear indication that much work still needs to be done.

Thanks to 70+ participating online brokers and partners...

...for being so open and engaged at the 2015 RETAIL BROKER SUMMIT in discussing the industry and our collective role in moving it forward to improve experiences and outcomes for investors at large. Here is the opening video with an update about the Recognia and TRADING CENTRAL business, and the themes discussed during the event. 

Post a comment if you are interested in attending or getting involved in the 2016 summit!
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