A knack for knowing what’s coming

“ETFs are here to stay and they are growing at a pace that can’t be ignored,” says Tiwari. “All kinds of financial [services] firms are looking at how to make ETFs work on their business platform. Some will manufacture their own branded product, while others may white-label them or wrap them into their portfolio products.”

ETF AUM in Canada stood at $85 billion as of Aug. 31, 2015, up 14% from $74 billion a year earlier. Although ETFs began as simple products designed to track the return of broad market indices, ETFs have evolved to include an array of investment strategies, from passively to actively managed, and many shades in between.

“ETFs have democratized investing, giving retail investors low-cost access to investment strategies previously available only to institutions,” Tiwari says. “But [ETFs] are not a simple exercise.”

He views education of both clients and financial advisors as a priority in his three-year role at CETFA, to ensure the product is properly understood and utilized. He considers the increasing level of ETF education to be one of the “tailwinds” that will boost the industry’s growth.

“The level of knowledge is low, but that is an opportunity for the industry,” he says. “The more we can do to raise awareness of ETFs and how to use them in a portfolio, the more that translates into higher usage. Once someone understands the benefits of ETFs, they are likely to keep using them.”

Another tailwind, in Tiwari’s view, is growing customer awareness of portfolio fees and costs. The second phase of the client relationship model, which will see full disclosure of firm compensation in dollar amounts as well as percentages – as well as a growing movement by advisors to fee-based practices – will encourage greater use of low-cost ETFs, Tiwari predicts.

“Investors are realizing that high fees are detrimental to long-term returns,” Tiwari says. “With increasing price transparency, many advisors are charging an annual fee at the account level, and it’s natural that these advisors will seek low-cost investments to put in client portfolios. I see that as a huge lift for the [ETF] industry.”

ETFs also stand to benefit from penetration into new delivery channels, such as robo-advisors, that compete on the basis of cost. In addition, Tiwari says, firms that are members of the Mutual Fund Dealers Association of Canada (MFDA), which are unable to sell ETFs due to a lack of a trading platform, should have a solution in place by yearend.

“MFDA firms represent a whole new channel,” he says, “and their advisors are excited about the opportunity to add ETFs to client portfolios.”

Tiwari notes that institutions also are making greater use of ETFs to get exposure to asset classes such as fixed-income more simply, economically and conveniently than by assembling a diversified portfolio on their own or accessing broad exposure through the futures market.

The inroads being made by banks in the ETF space also are helping to raise product awareness, and the industry is benefiting from their marketing strength and the power of their distribution network. BMO has become a major player in the Canadian ETF industry and Royal Bank of Canada has been gaining market share, and Tiwari anticipates that within five years, all the banks will have ETFs on their product shelf.

But, he cautions, the ETF industry must guard against muddying the waters with too many ETFs and increasing product complexity.

“We need to be careful of overproliferation,” he says. “As ETFs become more popular, the explosion of options could contribute to investor confusion.”

Tiwari brings a wide range of experience to his role as head of CETFA. Always strong in math and sciences, he had inclinations toward astronomy while growing up in Alberta. But after a couple of years attending the University of Calgary, he switched to law. Graduating from Osgoode Hall Law School in 1987, he zeroed in on securities, joining a small law firm just in time to experience the October stock market crash.

But working for a law firm was not entrepreneurial enough for Tiwari’s liking. To be closer to the inner workings of a financial services firm, he moved to the legal department of what was then Burns Fry Ltd. in Toronto (now BMO Nesbitt Burns Inc.). While there, he worked with a variety of departments, including investment banking, wealth management and the commodities group. In 1994, Burns Fry was bought by BMO, and Tiwari’s role expanded. He moved to London, U.K., as head of compliance for Nesbitt’s European and Asian operations, and was called to the bar as a solicitor in England and Wales in 1996.

After working on the legal aspects of major bank mergers, a strategy considered but abandoned in Canada in the mid-1990s, Tiwari decided to expand his role beyond the legal department. His goal was a more stimulating, hands-on, operating role in the business.

“As a lawyer, you’re there to provide technical expertise. But once things get done and the project is over, you’re unplugged,” he says. “You go from being an integral part of the process to handing it over to the business folks who decide how to make it work, [which] is the exciting part.”

In 2001, Tiwari became head of business development for North American asset management at BMO, his first real operating role. In that position, he oversaw acquisitions, alliances and new business initiatives. In 2004, he became BMO’s senior vice president of U.S. mutual funds and president of its Harris Insight Funds group, based in Chicago.

Along the way, he became interested in the ideas of John Vogle, a proponent of low-cost index investing and the founder of the U.S.-based Vanguard Group.

When Harris Insight Funds was sold, Tiwari found himself back in Toronto in 2006, with a mandate for global expansion as senior vice president of BMO Asset Management Corp. He saw the value of adding lower-cost index products to the active portfolio-management side of the business; as a result, four BMO ETFs were launched in 2009, with Tiwari leading the initiative as president of BMO Exchange Traded Funds.

“I’ve always been a big believer that ETFs can co-exist with active management,” he says. “At certain times or with certain mandates, it may make sense to index; and at other times, the active approach can provide alpha.”

When Vanguard entered the Canadian market in 2011, Tiwari, with his international background and mix of mutual funds and ETF experience, was the perfect fit to be the first local employee. The operation since has expanded to 28 crew members, and Tiwari anticipates there will be 33 by yearend.

In off hours, Tiwari enjoys time with his infant son and travelling to the wine regions of the world with his wife, a wine consultant and former head of fine wine for an auction house.

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