3 ways to use asset allocation strategies to add value

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Welcome to Advisor to Go, brought to you by CIBC Asset Management, a podcast bringing advisors the latest financial insights and developments from our subject-matter experts themselves. 

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Caitlin Ebanks, director, ETFs, CIBC Asset Management 

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2025 was a standout year for ETFs in Canada, with a record breaking $125 billion in new inflows. That pushed total ETF assets up to $713 billion spread across almost 1,800 different ETFs. We also saw 364 brand new listings in 2025. We saw inflow records shattered in every major asset class, including equities, fixed income and asset allocation ETFs. They each had a remarkable year.  

Today, we’re going to focus on asset allocation strategies, which were especially popular, attracting nearly $22 billion in new investments throughout 2025.  

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Asset allocation ETFs are multi-asset portfolios that offer a convenient way to get diversified exposure to different asset classes. If you think stocks, bonds and sometimes alternatives, they are an all-in-one professionally managed portfolio. They are designed to make portfolio building easier, giving investors an efficient way to match their investments to their risk tolerance and, essentially, their financial goals. 

You can find these ETFs across the risk spectrum, from all-bond portfolios to all-equity options. Some use active management, while others stick to a more static approach. Here at CIBC, we’ve chosen a static asset mix for our solutions, relying on low-cost passive ETFs as the building blocks. Even though these are passive, they’re built to track high-quality institutional benchmarks.  

We use MSCI for equities and FTSE for fixed income, so our clients can feel confident in the underlying quality of their investments. We also believe that the precision of the institutional benchmark is pivotal to building these static models. For instance, we won’t ever find a short-duration investment-grade bond in our long government ETF. This allows us to maintain our optimal asset mix and minimize turnover for taxable investors. 

If we’re going to talk about trends and key trends in the ETF industry in 2025, one of the key trends we’ve seen in the ETF space in Canada is fee compression, with some legacy providers reducing fees across their asset allocation suites. We are confident saying that CIBC asset allocation ETFs have the same or lower management fees across conservatives to all equity at 15 basis points as all other providers in Canada. 

Another trend we’re seeing in the asset allocation space is the inclusion of active ETFs, or an active overlay on static ETF portfolios. What I mean by that is the building blocks are maybe not always passive ETF solutions. They could be using an active ETF as well in their asset mix. Or there are some providers who are using an active overlay with their passive underlying holdings. What I mean by that is they have a portfolio manager that is overweighting or underweighting certain geographies, for instance, trying to add or generate additional alpha on these asset allocation portfolios using an active allocation tilt to passive investing. 

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There are several ways advisors can leverage asset allocation ETFs while still providing value to their clients. 

Advisors are constantly adding wealth accumulators to their book to offset their older clients who have assets, but are decumulating through retirement years and mandatory RRIFing, for instance. These low-cost all-in-one solutions are perfect for young professionals that may not have the expertise or the time to manage a complex portfolio of individual securities. 

These clients often leverage and value the advisor’s financial planning and tax expertise, as they are embarking on a variety of life events — buying a house, saving for retirement and children’s education — as well as focusing on accelerating their income and their careers. 

Another use case for advisors is managing clients’ costs. 

High transaction costs on smaller accounts can make it challenging for advisors to create diversified strategies, or replicate their existing models until clients reach scale. This exists even outside of transactional accounts. If you think about an RESP or a Registered Education Savings Plan, for instance, the max contribution is $2,500 per child per year, and up to a maximum of $50,000 per child. As these accounts are growing, it is challenging to properly diversify them in a cost-efficient way using individual securities. These asset allocation portfolios with a variety of risk profiles are a perfect solution for these types of accounts. 

Yet another use case for asset allocation ETFs within an advisor’s practice is cash management. Managing cash flows across an advisor’s book can be very challenging and time consuming, whether it is new contributions or cash flow from dividends or distributions. Many advisors use these asset allocation solutions as a single-ticket liquidity sleeve, as opposed to allowing cash to accumulate in these accounts. 

Oftentimes, this allows clients to remain fully invested until a quarterly or semi-annual account rebalance is scheduled. This keeps the portfolio inline, or onside from a compliance perspective with the investment policy statement. 

In other words, a growth investor doesn’t have a cash drag and can maintain their risk preference if they were to buy a growth or all-equity asset allocation ETF at a very minimal cost. 

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When designing custom model portfolios, there are three key considerations. To start, it’s a good idea to figure out how many models you’ll need for your clients based on their risk tolerance, and investment timelines. If you look at the asset allocation ETFs available in Canada, there are usually five main asset allocations: fixed income, conservative, balanced, growth, and all equity. Interestingly enough, if we go back to trends, the 100% fixed-income ETFs haven’t attracted much interest, while the all-equity ETFs have seen strong inflows, over $10 billion in 2025 alone. 

The next consideration is choosing the right securities for your models. It’s important to consider things like the quality of the index, the type of market exposure you’re looking for, liquidity, and whether you want to add any custom or satellite positions. This could include active strategies, alternatives or specific factor sector tilts. Building these models does require more work, especially when it comes to deciding on the right weightings for each security. 

This ties directly into our third consideration, which would be rebalancing and ongoing monitoring. We always recommend that advisors reach out to ETF providers for help with model construction. 

At CIBC ETFs, we support advisors by sharing our asset allocation weights, offering these solutions on an SMA platform, and even providing white-label strategies using our building blocks to recreate an all-in-one solution. 

If you’re interested, we can also integrate active ETFs into those models, still at a very competitive cost, typically between 20 and 40 basis points.

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