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Investors have never had a better decade than the 2010s. Certainly, the U.S stock market did incredibly and Canada was solid. But the real gains were in investor empowerment. A decade of competition, innovation and regulation has brought lower costs, more choice and more transparency to individual investors. Let’s look at some of the highlights.

The rise of robo-advisers

Robo-advisers have been around for five or so years in the Canadian market, not long enough to build a significant market presence. So don’t succumb to the temptation to write them off as a faddish riff on fintech (financial technology) that will never go mainstream.

What robos offer is vitally important – low-cost help in building and maintaining a properly built portfolio of exchange-traded funds. There isn’t a financial goal in life that can’t be achieved using a robo-adviser.

Why use a robo? Because you don’t want to buy overpriced mutual funds from your bank; because you can’t find an investment adviser to handle your modest account; or you have an adviser, but she or he is only interested in selling you overpriced mutual funds. Robos connect investors to effective investment portfolios in an economical, effective way.

Exchange-traded funds hit their stride

ETFs were on track in fall 2019 to outsell mutual funds for the second straight year. With more than $200-billion in assets as of Nov. 30, assets held in ETFs are still only about 12.5 per cent of the amount invested in mutual funds. But ETFs now have the momentum the mutual fund industry had in its 1990s heyday.

The ETF industry’s growth isn’t a totally great story for investors. In particular, there’s a tendency to issue funds to capture trends that any experienced investor knows are both temporary and bound to end badly. But the benefits of ETF growth outweigh the negatives. You can now buy ETFs to track the Canadian stock market with a management expense ratio of 0.06 per cent. That’s awfully close to zero.

Yes, you do have to pay commissions to an online broker to trade ETFs. But over the past decade, several brokers have conditionally limited or eliminated these costs.

The debut of balanced ETFs

Balanced ETFs took off immediately after their introduction in early 2018, which shows just how useful this product is. A balanced ETF is a “fund of funds,” which means it holds ETFs tracking stock and bond indexes in mixes that appeal to conservative, middling and aggressive investors.

How to be a successful investor: Pick a balanced ETF to suit your needs, then add money regularly over decades. You don’t need to rebalance your holdings because that’s done for you. The cost of owning balanced ETFs? About 0.2 per cent to 0.25 per cent, which is a monster-size bargain in comparison with the balanced funds the mutual fund industry offers.

Online investing gets cheap … will it get cheaper?

A lot of big U.S. online brokers cut their stock-trading commissions to zero in 2019, and the response from Canadian brokers was predictably lame. We are still waiting to see whether any brokers in this country will even reduce commissions, never mind eliminate them.

But let’s take the long view here. As the past decade began, investors were paying about $29 minimum to trade at the big bank-owned firms, or about $9.99 flat if they had $100,000 in assets with their broker. The $100,000 requirement for $9.99 trades later fell to $50,000 at bank-owned brokers and then started to disappear altogether at mid-decade.

Still lower commissions were available from independents Questrade and Virtual Brokers. They helped put pressure on the big players to cut costs.

The rise of fee-for-service financial planning

Fee-for-service planning has been around a long time, but mainly as a service for wealthy families. Now, it’s starting to catch on with a much wider swath of the population. Apparently, there’s an appetite for paying hundreds and, often, thousands of dollars to get questions about debt, retirement, taxes and more answered by someone who does not sell investments or want to manage your portfolio.

As noted in a recent Portfolio Strategy column, some fee-for-service planners are so busy they have waiting lists. There are now enough planners of this type to populate a national directory you can download here.

More and more fee-for-service planners are segmenting their services so you can buy a full, big-picture plan, or discuss specific matters such as the affordability of buying a house, debt reduction and retirement planning. Fee-for-service planners usually don’t discuss specific securities, but they can help you find the right mix of stocks and bonds to meet your investing goals.

If you’re interested in any sort of financial planning, make sure you deal with a properly accredited planner. The top designations are the certified financial planner (CFP) and the registered financial planner (RFP).

High-interest saving accounts replace money market funds

Money market funds were the go-to place to park cash until the financial crisis came along and sent interest rates into the sub-basement. The 10-year annualized return for one of the country’s largest money market funds was 0.7 per cent as of Nov. 30, which compares with an average inflation rate of 1.7 per cent over that period.

The better option is the high-interest saving account packaged either as a mutual fund or ETF. Returns as of late December ranged from 1.4 per cent to 1.6 per cent for high-interest savings account mutual funds and roughly 2 per cent for the ETFs. I recently compiled a full list of the savings account products offered by all major online brokers.


Sorry for the jargon, but CRM2 (for client relationship model, phase two) is what everyone calls the regulations introduced in 2017 to improve disclosure of fees and returns for individual investors. Every January, investors receive a statement showing what they have paid for advice in dollar terms and their annual returns.

CRM2 is not comprehensive enough. Mainly, there needs to be more information to show the full range of fees paid by investors who own mutual funds. But think back to the level of pre-CRM2 disclosure. Returns for the previous quarter or month, with no long-term numbers. Advice fees described in percentage terms only, which has less impact than fees shown in dollars.

The bottom line with CRM2 is that investors are better informed about advice fees and returns than they used to be. If they read their CRM2 statements, that is.

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