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Happy clients. Lower fees. Smooth returns. Check.

Emily Mackay, Vice President, Intermediary Distribution, BMO Global Asset Management, shares her insider views on a cost-effective strategy that checks all the right boxes for Advisors and their clients in this market environment.

September 2021

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Emily Mackay

Vice President, Intermediary Distribution, Toronto & Northern Ontario

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Finding the right package

As the world increasingly shifts toward virtual communication and digital services, the role of the discretionary Advisor – and the value they bring – has evolved dramatically. While 95% of their time may have previously been spent on trading stocks and money management, there is now an equal focus on both returns and relationship.

As a result, it’s becoming more important to simplify investment management as much as possible, so you can dedicate the time required to build that lasting relationship based on trust and transparency – and enhance the client experience. But it’s not that simple. Advisors are required to demonstrate the logic and rationale behind their sound investment decisions, with a focus on a low cost, strategic asset mix that delivers returns.

ETF-based Portfolios (ETFPs) can be a time-saving, all-in-one solution to address this challenge, while helping clients build a stronger core in their portfolios – for small accounts, or as a complement to other actively managed funds, individual stocks or ETFs. With cost effective access to a set of diversified ETFs through the convenience and flexibility of a mutual fund, ETFPs also provide an element of professional, active management through continuous portfolio monitoring. When used as a building block, they act as a risk adjustment vehicle, with the ability to dial up or down to accommodate clients’ changing risk tolerances without disturbing other positions held.

This quality is particularly vital in this low-rate environment. More than ever before, Advisors are revisiting fixed income sleeves to de-risk portfolios as many clients have expressed disappointment that the so-called “safe portion” had experienced losses at the same time as equities were pulling back. Look at it this way: the need for capital preservation, cash flow, liquidity – and a portfolio parachute – presents a growing opportunity for Advisors. It’s about finding an investment strategy that best meets clients’ needs, and then finding the right package for it to fit your business.

The need for capital preservation, cash flow, liquidity – and a portfolio parachute – presents a growing opportunity for Advisors.

Fixed income portfolios made easy

The BMO Income ETF Portfolio, for example, is a low risk,1 diversified fixed income solution, with a built-in hedge against inflation. The strategy insulates portfolios during turbulent times (see graph below), delivering an overall smoother, more consistent return path.

BMO Income ETF Portfolio Performance During Market Downturns

Click here to view enlarged image >


The performance of the Corporate Class version of the BMO ETF Portfolio is displayed to show the longer track record.

Source: BMO Global Asset Management, June 2021.

It also helps with the many obstacles Advisors face when building a FI portfolio for clients. Amid the current backdrop, most bonds are at a premium (the coupon is higher than the yield to maturity), and there is an educational component here to explain the difference between the capital loss on the bond vs. the yield generated through coupon payments. Not only does BMO Income ETF Portfolio provide institutional-style access to a broad set of fixed income securities (the inventories bond desk for dealers is currently limited), there is also the benefit of having one consolidated line item that shows total return, instead of price return. This helps simplify and streamline the conversation to focus on what really matters for clients – both capital gains and the income generated from coupons.

As for the spread disadvantage when accessing bonds from a desk, the Fund offers ETF pricing in a mutual fund structure, which allows for flexible cash flow options like systematic withdrawal plans (SWPs) for those with monthly requirements. It also has a corporate class version for ultra high-net-worth clients. Recently, one Advisor I spoke with used the vehicle for someone who just sold a home, and planned to slowly deploy funds into their equity portfolio at certain intervals.

With this all-in-one solution, IAs are able to use the time gained to add value through sophisticated tax and estate planning strategies. Another use case I’ve come across is probate savings: BMO Income ETF Portfolio Class was allocated as a core portion of a client’s non-registered account, while stand-alone fixed income ETFs were placed in a registered account, where there is higher coupon and risk. The Advisor leveraged the ETFP’s active management in the corporate, investment-grade space where coupons are roughly 2%, and also maximized tax-efficiency.

Institutional-style access to a broad set of fixed income securities… one consolidated line item that shows total return.

Spotlight: BMO Income ETF Portfolio

  • Institutional access to a diversified portfolio of fixed income ETFs
  • Smoother return performance, with downside protection
  • Flexibility and convenience of mutual funds, with corporate class, T Series, PACs/SWPs, and recurring revenue in transactional accounts
  • Professionally managed to save you time, combining active and passive, including dynamic currency management
  • Cost effective with F Series all-in MER of 56bps; Advisor Series of 1.67% (pays 1% trailer)

Positive Fee Conversation: Check It Off Your List

With a track record dating back to 2010 and over $30 billion in AUM, all of our ETFPs provide expert oversight, and a lower, simplified cost structure, as underlying ETF fees are included in the mutual fund. Advisors can also use our stand-alone ETF-based mutual funds, like BMO Covered Call Canadian Banks ETF Fund, for guaranteed end-of-day NAV and commission-free trading, helping to improve the overall efficiency in their book of business, at the same price as an exchange traded fund.

With a reduced overall cost of investing, there is a golden opportunity to have a positive fee conversation with clients, highlighting how this could help them reach their financial goals sooner. Add to this, integrating ETFPs can, in many cases, increase revenue and existing assets, while helping you focus on continuous value-add services. To help frame this important discussion with clients, check out our Value of Advice resource for some practical stats).

What you get with BMO ETF Portfolios:

  • Simplified investing through all-in-one access (PRO TIP! consider as a professionally managed, cost-effective solution for TFSAs, RESPs and smaller accounts for children of existing clients)
  • Diversification through a portfolio of stocks or ETFs in a single mutual fund
  • The opportunity to benefit from active and passive management with continuous oversight
  • Lower fees, and ETF tax efficiencies flow through the mutual fund trust

To learn more about ETFPs or other innovative solutions to navigate the current market, contact your BMO Global Asset Management Regional Sales Representative.



1 Risk is defined as the uncertainty of return and the potential for capital loss in your investments.

Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements. In connection with any forward-looking statements, investors should carefully consider the areas of risk described in the most recent simplified prospectus.

This article is for information purposes. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Investments should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance.

BMO Corporate Class Funds are classes of BMO Corporate Class Inc., managed by BMO Investments Inc., a financial services firm and separate entity from Bank of Montreal.

Commissions, trailing commissions (if applicable), management fees and expenses all may be associated with mutual fund investments. Please read the fund facts or prospectus of the relevant mutual fund before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Distributions are not guaranteed and are subject to change and/or elimination.

For a summary of the risks of an investment in BMO Mutual Funds, please see the specific risks set out in the prospectus.

BMO Mutual Funds are managed by BMO Investments Inc., which is an investment fund manager and a separate legal entity from Bank of Montreal.

BMO Global Asset Management is a brand name that comprises BMO Asset Management Inc., BMO Investments Inc., BMO Asset Management Corp., BMO Asset Management Limited and BMO’s specialized investment management firms.

®/™Registered trade-marks/trade-mark of Bank of Montreal, used under licence.

®/™Registered trade-marks/trade-mark of Bank of Montreal, used under licence.

BMO Global Asset Management is the brand name for various affiliated entities of BMO Financial Group that provide investment management, and trust and custody services. BMO Global Asset Management comprises BMO Asset Management Inc., BMO Investments Inc., BMO Asset Management Corp., BMO Asset Management Limited and BMO’s specialized investment management firms. Certain of the products and services offered under the brand name, BMO Global Asset Management are designed specifically for various categories of investors in a number of different countries and regions and may not be available to all investors. Products and services are only offered to such investors in those countries and regions in accordance with applicable laws and regulations. BMO Financial Group is a service mark of Bank of Montreal (BMO).

BMO ETFs are managed and administered by BMO Asset Management Inc., an investment fund manager and portfolio manager and separate legal entity from Bank of Montreal. Commissions, management fees and expenses all may be associated with investments in exchange traded funds. Please read the prospectus before investing.

Exchange traded funds are not guaranteed, their values change frequently and past performance may not be repeated.

BMO Mutual Funds are managed by BMO Investments Inc., which is an investment fund manager and a separate legal entity from Bank of Montreal.

Commissions, trailing commissions (if applicable), management fees and expenses all may be associated with mutual fund investments. Please read the ETF facts, fund facts or prospectus of the relevant mutual fund before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

For a summary of the risks of an investment in the BMO Mutual Funds, please see the specific risks set out in the prospectus. ETF Series of the BMO Mutual Funds trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination.

BMO Life Assurance Company is the issuer of the BMO Segregated Funds individual variable insurance contract referred to in the Information Folder and the guarantor of any guarantee provisions therein. The BMO GIF Information Folder and Policy Provisions provide full details and govern in all cases. BMO GIF products are offered through BMO Life Assurance, a separate legal entity than BMO Global Asset Management and wholly owned by BMO Financial Group. Segregated funds are only available for sale by individuals with appropriate insurance licences and are not considered a mutual fund. Segregated fund fees are higher than mutual funds as they include insurance fees to provide for the guarantees on deposits at maturity or on death.