Ethics & Principals
In an industry where ethics come routinely into question, it is paramount that everything we do meets the highest professional and ethical standards.

The world of investment management is a notoriously secretive domain. Most firms make at least some effort to be perceived as ethical, but when you think about the people behind your investments, how do you feel? Do you get the sense they really care? Do you feel like your business truly matters? What are they doing to walk the talk when it comes to ethics?

It’s no secret that investment advisory firms should have a fiduciary responsibility to their Clients. The truth is that only registered Portfolio Managers are recognized under law to be fiduciaries. Everyone else is only required to deal fairly, honestly, and in good faith. I would guess that most Canadian investors don’t actually know what that means. How come so many conflicts of interest still exist? In this industry. I think there is something very, very wrong with they way the financial services sector operates, and Canada is perhaps the worst jurisdiction for deplorable conduct in the entire developed world.

When Larry and I built ETFCM, we started with our own experiences in the investment world, and our desire to make it better. Our vision is to run a firm that really cares about its Clients, and makes this apparent in how we operate. Let me tell you a little bit about what we’re doing to try and make things better:

We start with aligning the best interests of our Clients with how well we do for them. The most obvious way to do this is with compensation. We’re 100% fee-based at ETFCM, which is also based to a large extent on performance results. That means every transaction is solely motivated by protecting and growing Client portfolios, since this is the only way we increase our compensation. If you ask me, keeping Clients fully invested to maintain trailer fees has got to be the biggest conflict of interest in the business. Our mandates are designed to eliminate conflicts. We have no hidden incentive to use one investment over another, so we pick the best tool for the job – even if that happens to be temporarily having assets in cash if we don’t like the risks in the equity or bond markets.

When you receive our management agreement, you also get a copy of our Relationship Disclosure Document and Fairness Practices. This document discusses our approach achieving full compliance with disclosure rules, referral arrangements, dispute resolution, and personal trading amongst others. Speaking of personal trading, all principles of the company (including Larry and myself) invest ONLY in the same strategies as our Clients. Why on earth would we ask you to trust us with your money if we didn’t feel this was the best place to invest our own?

We back all this up with REAL transparency. That doesn’t mean burying disclosure in 100 page annual reports, or intentionally complex agreements that make it difficult to understand how your portfolio will be managed. Our approach is simple and straightforward. We use separately managed accounts, which are held in the Client’s name at National Bank. This means ETFCM does not take possession of your money or securities, and your accounts are protected by the Canadian Investor Protection Fund (CIPF), up to $1 Million per account. Your reporting is generated by National Bank, not someone in our office. You can see exactly what investments you hold, and all transactions and fees that occur in your account via online access. We employ independent auditors to keep optics crystal clear, and ETF Capital Management is also a member of the Portfolio Management Association of Canada (PMAC).

No discussion of transparency is complete without mentioning investor education. Not many people realize this, but Larry isn’t employed by BNN. Berman’s Call is our way of giving back to Canadian investors. We believe smart, informed investors make the best Clients – we hope you agree!


Jared C. Rabinowitz
President & Chief Operating Officer, Partner
ETF Capital Management
© ETF Capital Management 2012