E295 - The Case for Asset Allocation ETFs

E295 – The Case for Asset Allocation ETFs

The following transcript was generated using machine learning and may contain errors.

SPEAKERS: Danielle Neziol, Alain Desbiens

Jamie Sturgeon: Asset allocation ETFs offer simplicity, diversification and low fees, making them an increasingly popular choice for Canadian investors. But with more than 90 options on the market, finding the best fit can be challenging. In today's episode, Alain Desbiens is joined by Danielle Neziol to explore the unique benefits of these all-in-one solutions and highlight BMO ETFs that can help investors build wealth and manage income more effectively, whether starting out or planning for retirement. Before we hear from the team, please consider subscribing to Views from the Desk on your preferred podcast platform. And for many more ETF insights and resources, visit bmoetfs.com . That's bmoetfs.com .

Danielle Neziol: Asset allocation ETFs have quickly become the go-to investment for Canadians, gathering over $40 billion in assets under management as of December 2025. These ETFs are marketed as simple, easy-to-use investment strategies offering a diversified portfolio in an all-in-one ETF wrapper. But with over 90 all-in-one ETFs trading in Canada today, what might not be so simple is choosing the right one that’s the best fit for your portfolio and investment objectives. I'm Danielle Neziol with BMO ETFs and here today to share some insight in how BMO's All-in-One ETFs stand out from this crowded environment is Alain Desbiens, Vice Chair of BMO ETFs. Alain, it's so great to have you on the channel today.

Alain Desbiens: Hello, Danielle. Thanks for welcoming me.

Danielle Neziol: As a quick reminder, Alain and I will not be providing any investment advice or investment recommendations today. We will not be providing any tax advice. Today's show and all our shows are about investment education for do-it-yourself investors. Alain, let's get started. Maybe just give a little refresh to the audience who might be still learning about what asset allocation ETFs are. Can you give us an update on the flows to these ETFs in Canada, and why are they just such a popular type of ETF for investors?

Alain Desbiens: Great question. First, Danielle, the ETF industry so far has had its best year ever. Year to date, the industry had more than $100 billion of net sales, and the industry passed an important milestone with $700 billion of asset under administration. The month of November was the best month ever in terms of net sales, and multi-asset class were basically 10% of all the net asset in Canada. One of the reasons why it's growing so much in the ETF world is that the ETF industry is in catch-up mode. Asset allocation and balance fund represent only 6% of the ETF industry. There is more than $1 trillion, Danielle, or 40% of all the mutual fund industry in balance and asset allocation. So, there's a lot of room to grow for asset allocation ETF in Canada. As an example, because we've got the latest CIMA data as of the end of October 2025, the year-to-date net sales in the balance category for ETF is $8.5 billion, and the year-to-date net sales as of October 2025 in the balance mutual fund space is $1 billion. So we see that the industry is catching up on asset allocation ETF. What does help also is all the education that you do in the space. The commission-free trading at discount brokers, investors' education around indexing, innovation, asset allocation based on core broad low-cost index fund and model portfolios are really engine of growth for asset allocation ETF and make them so popular. But let's not forget the basics, Danielle. ETF Asset Allocation is easy, simple to buy and it works. There's a lot of benefits and value-add in an Asset Allocation ETF. A couple: simplified investing, broad diversification, professionally constructed, automatic rebalancing, transparency, liquid, low-cost, all-in-one cost structure. So, these are a couple of the benefits and value-add of the asset allocation ETF.

Danielle Neziol: Thanks for going over all those benefits. I know so many investors out there have already figured this out. One of their favorite things about asset allocation ETFs, as you mentioned, Alain, is their low fees.They're very low-cost products. Lower fees than most of the average MER and ETFs out there on the market here in Canada. At BMO, we're aware of this. We know investors are looking for low-fee products, are looking to cut costs all across the spectrum in their lives, which is hard to do in an inflationary environment. So, what we did at BMO, Alain, I know we love talking about this, we recently lowered our fees on most of our asset allocation ETFs, just passing back more performance to the investor, I say just more money in their genes.

Jamie Sturgeon: Managing your own portfolio takes time, researching markets, juggling spreadsheets and constantly rebalancing. But what if you could skip the stress without sacrificing strategy? That's where BMO all-in-one ETFs come in. These ETFs are designed to simplify your investing journey to automatic rebalancing and a diversified asset mix, helping keep you on track without the high fees. With tickers that start with the letter Z, you can just Z it and forget it. To learn more about all-in-one ETFs, visit our website at bmogam.com .

Danielle Neziol: Alain, when an investor is looking at different asset allocation ETFs, how can they compare fees on these different products?

Alain Desbiens: You're right to pinpoint this. BMO did lower its fees on asset allocation ETFs in June 2025. We've reduced our management fee to 15 BPs. So the fees of ZCON, ZBAL, ZGRO and ZEQT were reduced from 20 BPs to 15 BPs. That’s a 25% fee reduction. Our fees, Danielle, are cheaper than all the major ETFs and mutual fund players in the same balance category in Canada. And you know what? We did it before, and we're still cheaper with a management fee of 15 BPs. ZCON and ZBAL are what we call in the global neutral balance category. Morningstar did recently a great 2025 Canadian Fund Study. There is a lot of great information inside of that document. But what is interesting is they're giving us the active fees per asset allocation in Balanced Fund per percentile. So recently, Morningstar did a 2025 Canadian Fund Study to give a more comprehensive look at the investment fund fees in Canada. When looking at the category of ZCON and ZBAL, the global neutral balance, the median fee in Canada is at 0.98. So, at 0.15, ZCON and ZBAL are in the 5th lowest percentiles of fees in Canada in the $1 trillion plus mutual fund and ETF categories. The same for ZGRO that is inside of the global equity balance category. Again there, the median fee in Canada is at 1.08. Again, ZGRO is in the 5th lowest fees in the category and it’s the same for ZEQT that is in the Canadian Fund Global Equity. So, this is kind of important. You know, before the podcast today, Danielle, and I've asked you permission to do this, can I mention your age?

Danielle Neziol: Alain, yes. I'm 39 years old.

Alain Desbiens: You're so young. I'm 62. So, you know what? Like all the investors listening to us today, lower fees can help you reach your goals sooner in accumulation and de-accumulation. So, let's say we take your example, Danielle. You're 39. So, if you're meaning, you know, you're a financial planner, they're going to do a plan, not with a 50% survival rate, which would be 95 years old, but they would do it with a 25% survival rate table that is 98 years old. So, in your case, this is incredible. You've got 49 years old of time horizon of accumulation and de-accumulation in front of you.I'm a young baby boomer. I'm 62 years old. So, basically, at 62 years old, if I have a plan with a financial planner, and they use what we call, you know, the probability of survival rate of 25%, this is the good practice, they're going to do a plan for me with a 36 years’ time horizon. This is important because lower fees can help you reach your goals sooner in the accumulation phase. So, paying less fees adds up. And also, Danielle, in the de-accumulation phase, where savings last longer with lower fees.

Danielle Neziol: Thanks for that, Alain. It is very powerful to know that the lower fees just help investors reach their financial goals quicker and build wealth faster, so really meaningful impact on that fee drop. We also did something interesting and exciting with our asset allocation ETFs, Alain. We recently added discount bonds with the ETF ZDB to the fixed income allocation of our asset allocation ETFs. This is an exciting thing for anyone holding these ETFs in non-registered or taxable accounts. Alain, what can you tell us? What benefits do discount bonds have for investors?

Alain Desbiens: Well, the first thing, two-thirds of the investment in Canada is non-registered, so it is taxable. So, minimizing the tax impact with a discount-bound ETF like ZDB is really helpful for Canadians in asset allocation and in de-accumulation and in de-accumulation phase. So, BMO Discount Bond ETFs, invest in bonds where the current yield is near or below per value. Having the coupon and yield to maturity aligned, that provides investors with, we would say, fair taxation. Why did we use ZDB particularly? Because it has the yield to maturity, the duration, and sector characteristics designed to approximate the Canadian aggregate universe, and this is really what we want to do on the Canadian fixed-income side inside of our Asset Allocation ETF.

Danielle Neziol: Thanks, Alain. So, basically, what we did, we took ZAG, which is the Canadian Aggregate Bond ETF. We replaced it with ZDB, so same exposure, matching exposures, as you said, but more discount bonds for investors, which pay out more capital gains than income. So, something to think about and consider for those using these products in taxable accounts. Alain, we also offer, on our Asset Allocation ETFs, we call these dot T's (.T), and this is because on some of the tickers, you'll see the ticker, for example, ZGRO, with a dot T (.T)after it. Can you educate us on what the dot T (.T) means and how it can be a good feature for someone looking for monthly cash flows?

Alain Desbiens: Yes, and it goes with, you know, my demography, which is the baby boomer. So basically, what we did, Danielle, is we've brought T-Unit ETFs to the market on two of our Asset Allocation ETFs, ZBAL and ZGRO. And we've launched those T-Unit ETFs because they can meet the needs of retirees that are transitioning from accumulation to de-accumulation. This is really important because, as you know, demography is changing in Canada. Just in 2023, the Labor Force Survey estimates that by 2025, at the time, the numbers of people 65 and plus would grow to 1 million people. And based on current participation rates, nearly 900,000 workers have left their jobs between 2023 and 2025. So there's more and more people going in their de-accumulation phase. When you look at the current ZBAL and ZGRO, their distribution yield is around 2% and 1.7% after fees. So really, ZBAL.T and ZGRO.T are designed for investors looking for a consistent cash flow higher than 2 or 1.7%. And in the case of our T, this is a cash flow of 6%. This is annualized and this is paid monthly. Just as a reminder, what is a T-Series Exchange Traded Funds? So T-Series ETFs are designed to provide a higher, predictable, and potentially more tax-deficient cash flow. This is similar to a T-Series Mutual Funds. The T-Series ETF will pay a fixed annual distribution rate, monthly based on the end of the year NAV, and will pay out return of capital above the portfolio's yield-less expense. Really important, this should not be construed as tax advice, as each investor's situation is different. Please always consult your tax advisors.

Jamie Sturgeon: It's the small things that make us Canadian. At BMO ETFs, all of our tickers start with Z. That's right, Z, not Z. From ZSP to ZEB, we know how to build solutions for the Canadian investor. So the next time you invest in ETFs, consider AZ instead. Visit bmoetfs.com for more.

Danielle Neziol: Thanks, Alain. So, paying out a little more than what the portfolio yields. Typically, I think ZGRO and ZBAL yield around 2.5% to 3%.

Alain Desbiens: Right now, it's 2% for balance and 1.7% for execution.

Danielle Neziol: So, there you go. So, then really designed for those investors in their de-accumulation phase, paying out a little bit extra each month. Along with so many asset allocation ETFs on the market, I think I mentioned there’s about 90, which when I looked that up in the National Bank Report, I was shocked. Shocked, but also it makes sense because these really resonate with investors, these products. So, with all these products on the market, why should investors look to BMO Asset Allocation ETFs? What makes BMO ETFs different?

Alain Desbiens: First, I think you want to have a solid ETF provider helping you with asset allocation ETF. BMO ETF is the second largest ETF provider in Canada. We have more than 160 billion dollars of AUM. We've done a lot of firsts. We have more than 50 tickers with a 10-year track record, more than 30 tickers over one billion dollars. So, a lot of award winnings, you know, Exchange Traded Funds.So, this is really important that you've got to keep providing providers, you know, to assist you on the asset allocation. Specifically, for BMO's ETF asset allocation, I think we've tried, you know, early to do all in one simplified investing, tracking indices like the S&P, MSCI, and FTSE inside of our asset allocation. And we're using some of the largest and most liquid index ETF in Canada. A couple of examples in ZCON, ZBAL, ZGRO, ZEQT, we're using ZSP that has more than $17 billion of AUM, ZAG that has $11 billion of AUM, ZDB that has more than a billion dollar of AUM, ZCN, our BMO S&P Tax Cap Composite Index that has more than $10 billion of AUM, ZEA, our BMO MSCI EAFE index ETF that has more than $10 billion of AUM, and ZEM, our BMO MSCI Emerging Market Index ETF that has more than a billion dollars of AUM. So, this is important. The underlying inside of the BMO Asset Allocation ETF, you know, those ETFs that were used are part of the top 50 biggest ETF in Canada. This is really key for a lot of investors. Also, you know, performance. Our BMO Conservative ETFs, ZCON; our BMO Balanced ETFs, ZBAL; our BMO Growth ETFs, ZGRO; ZEQT, are all four and five star, morning star rated. So this is important. Low fee, innovation, using core broad, liquid, big AUM Exchange Traded Funds, great performance, good morning star rating. So, why use BMO? Well, we've reduced our fee before everyone at 15 BEEPS. This was done in June 2025. The fees of ZCON, ZBAL, ZGRO and ZEQT were reduced then from 20 BEEPS to 15 BEEPS. That's Danielle, a 25% fee reduction. Our fees are cheaper than all the major ETFs and mutual fund players in Canada. And I repeat it, we did it before and we're still cheaper with a management fee of 15 BEEPS. You know Danielle, BMO Asset Allocation ETF really made investing easier. We did a lot in terms of first and innovation. I'm thinking about our ZESG. Our T-Series were still the only one in the Canadian marketplace to offer this on the ETF landscape. We've reduced our management fee before at 15 BEEPS and we've done also ETF stock splits. This was all designed for accumulation and de-accumulation needs of investors. So this is a couple of the key benefits that we bring on the table.

Danielle Neziol: Thanks, Alain. So that operational stability, our track record, the performance really, we didn't talk a lot today about index investing, but that's essentially what these ETFs are at BMO. We use the index approach, and you look up the SPIVA reports, index investing has performance that's persistent. So a lot of good things to look at when you're looking at BMO, the lower fees, the addition of the discount bonds, and of course the dot T’s (.T)for income for those who are entering a de-accumulation phase. Alain, it was so great to have you on the channel and talk about Asset Allocation ETFs with you. Thanks so much for joining us.

Alain Desbiens: Thank you, Danielle, for the invitation.

Danielle Neziol: That's it for us today. We hope you enjoyed the show, and we'll see you next week.

Jamie Sturgeon: Thank you to Danielle Neziol and Alain Desbiens for joining us on the BMO Views from the Desk podcast. Today, the team discussed the increasing number of Asset Allocation ETFs on the market and how these products can strengthen portfolios and accelerate wealth creation at every stage of life. We heard about the BMO Balanced ETF, ticker ZBAL.T, and the BMO Growth ETF, ticker ZGRO.T, two ETFs in the T-Series designed for the growing population of retirees transitioning from accumulation to decumulation. For more information about the other ETFs discussed in this podcast, be sure to check out the episode notes, contact your regional BMO ETF specialist, or visit the ETF Center at bmoetfs.com That's bmoetfs.com The viewpoints expressed by the portfolio managers represent their assessment of the markets at the time of publication. Those views are subject to change without notice at any time without any kind of notice. 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. Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. Commissions, management fees, and expenses, if any, all may be associated with investments in Exchange Traded Funds. Please read the ETF facts or prospectus before investing. Exchange Traded Funds are not guaranteed. Their values change frequently, and performance may not be repeated.

BMO Global Asset Management is a brand name under which BMO Asset Management Inc and BMO Investments Inc operate.

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