The days of mutual funds costing investors 3% or 4% annually appear to be behind most of us. The rise of exchange traded funds (ETFs) has changed the game, and many investors who would consider themselves to be "passive" (i.e. not willing to actively pick stocks on their own, but defer to a fund) are now choosing ETFs for their highly diversified nature and rock bottom fees.
Canadian management fees on invested capital as a percentage of capital invested has remained very high by global standards, but is starting to come down, due in part to the rise of "made in Canada" ETFs.
Canadian banks have been reluctant to offer ETFs to investors, due in part to the relatively high market share mutual funds continue to hold in Canada relative to many other jurisdictions which have lower fees.
The reasons behind why fees are higher in Canada vary, but the reality that Canada's banking sector has an oligopolistic structure means that investors often have less choice, which has driven retail financial products that may or may not have been in the best interests of investors looking to save, for quite some time.
Earlier this year, Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) became the last of Canada's large banks to officially offer ETFs, perhaps marking the end of an era, or instead signifying the importance of embracing change in this space.
In either case, long term investors seeking to set aside capital and earn higher returns over time should consult any one of the five big banks (though Bank of Montreal continues to lead the way in the ETF world) for ETF advice.
Invest wisely, my friends.
