Why Financial Advisors Don't Recommend XEQT (And What That Tells You)

A few years ago, I sat down with a financial advisor at one of Canada’s Big Five banks. I had some money saved up, no idea what to do with it, and figured a professional would point me in the right direction.

The advisor was polished. Nice suit, firm handshake, a framed certificate on the wall. He asked me a few questions about my goals and risk tolerance, typed something into his computer, and then presented me with a recommendation: a “diversified growth portfolio” made up of three in-house mutual funds. He showed me a glossy one-pager with historical returns, talked about how the fund managers had decades of experience, and told me I was in good hands.

What he didn’t tell me – what I had to discover on my own months later – was that those three mutual funds had a combined MER of 2.31%. He didn’t mention that almost every actively managed fund in Canada underperforms a basic index over time. And he certainly didn’t mention XEQT, an all-in-one ETF that holds over 9,000 stocks in 49 countries for a total fee of 0.20%. Why would he? Recommending XEQT would have earned him nothing. Recommending those mutual funds earned him a trailing commission for as long as I held them.

That experience changed how I think about financial advice in Canada. Not because that advisor was a bad person – he wasn’t. He was a salesperson operating inside a system designed to sell expensive products. And once you understand that system, everything about the financial advice industry starts to make a lot more sense.

1. The Incentive Problem: How Financial Advisors Get Paid

Here’s the thing most Canadians don’t understand about financial advisors: the vast majority of them don’t work for you. They work for the institution that employs them, and they get paid based on what they sell you, not on how well your investments perform.

There are three main ways financial advisors in Canada get compensated:

Trailing commissions

When a financial advisor sells you a mutual fund, the fund company pays them an ongoing trailing commission – typically 0.50% to 1.00% of your invested assets every year. This commission is baked into the fund’s MER, so you never see it as a separate charge. It just quietly reduces your returns.

Here’s what that means: if your advisor puts you into a mutual fund with a 2.00% MER, roughly half of that fee goes to the fund company for management, and the other half goes to your advisor as a trailing commission. Your advisor earns money every single year you stay in that fund, whether they talk to you or not.

AUM (Assets Under Management) fees

Some advisors, particularly at independent firms and wealth management shops, charge a flat percentage of your total portfolio. This is typically 1.00% to 1.50% on top of whatever underlying fund fees you pay. So if they put you into funds with a 0.50% MER and charge a 1.00% advisory fee, you’re paying 1.50% total – and that’s on the cheaper end.

Fee-only planning

A small but growing number of advisors charge a flat fee or hourly rate for financial planning advice. They don’t sell products and don’t earn commissions. We’ll come back to these folks later, because they’re the exception that proves the rule.

Why XEQT earns them nothing

Now, here’s the critical question: what happens when a trailing-commission advisor recommends XEQT?

Nothing. They earn nothing.

XEQT is an ETF. It doesn’t pay trailing commissions. There’s no fund company writing the advisor a cheque for selling it. The advisor’s compensation on a $100,000 XEQT recommendation is exactly $0 per year.

Let me show you what this looks like in a table:

When the advisor’s paycheque depends on recommending expensive products, is it any surprise that cheap, simple products never come up? This is not a conspiracy theory. It’s basic incentive alignment. The advisor isn’t necessarily being dishonest – they may genuinely believe in the funds they recommend. But the system they operate within is structurally incapable of promoting low-cost solutions.

Charlie Munger said it best: “Show me the incentives, and I’ll show you the outcome.”

2. The Simplicity Problem: You Can’t Charge for “Just Buy XEQT”

Even setting aside commissions, financial advisors face a more fundamental problem with XEQT: it makes their expertise look unnecessary.

Think about it from the advisor’s perspective. A client walks in and asks, “What should I do with my money?” If the honest answer is “Buy XEQT in your TFSA every month and forget about it,” the conversation is over in five minutes. There’s no ongoing relationship. No quarterly reviews. No portfolio adjustments. No annual rebalancing meetings. No justification for any fee at all.

Advisors need to create complexity to justify their compensation. Here’s what that looks like in practice:

Portfolio construction theater

Instead of one all-in-one fund, the advisor builds a portfolio with 6-12 different mutual funds – a Canadian equity fund, a US equity fund, an international fund, a bond fund, maybe a “specialty” fund in real estate or resources. This looks sophisticated. It feels like expert work. The client sees a diversified portfolio and assumes the advisor is earning their fee.

But here’s what I’ve learned: XEQT already does all of this inside a single ETF. It holds four underlying iShares funds covering Canadian, US, international developed, and emerging market equities. The allocation is set by BlackRock’s portfolio managers and rebalanced automatically. You’re getting professional-grade diversification across 9,000+ stocks in 49 countries – without paying anyone 1-2% for the privilege.

Rebalancing that happens automatically

Advisors often cite rebalancing as a key service they provide. “Markets shift, allocations drift, and we bring everything back in line.” This sounds important. And for a multi-fund portfolio, it genuinely is work.

But XEQT rebalances itself. That’s the entire point of an all-in-one ETF. When US stocks outperform and drift above their target weight, BlackRock adjusts. When emerging markets lag and fall below target, BlackRock adjusts. You don’t need to call your advisor. You don’t need a meeting. It just happens.

The complexity premium

There’s a term in behavioural economics called the “effort heuristic” – the idea that people value things more when they appear to require more effort. A 12-fund portfolio feels like more work than a 1-fund portfolio, so it feels like it should cost more. Advisors, consciously or not, exploit this bias.

But in investing, complexity doesn’t equal quality. The SPIVA Scorecard consistently shows that simple index-tracking strategies outperform the vast majority of complex, actively managed ones. You’re paying for the appearance of sophistication, not actual results.

3. The Math: What Advisory Fees Actually Cost You Over 30 Years

Let me show you the real cost of financial advice. Not the percentage – the actual dollar amount you’ll pay over a lifetime of investing.

Assumptions:

• Monthly contribution: $500
• Starting balance: $0
• Gross market return: 8% annually
• Time horizon: 30 years

Now look at what the advisor actually costs you compared to XEQT:

That $217,742 is not money that went toward better performance. Remember, roughly 90% of actively managed funds underperform their benchmark index over 15+ years. You’re paying more for worse results. The advisor’s fee is not an investment in better outcomes – it’s a transfer of your wealth to someone else.

Let me put it another way. If you invest $500/month for 30 years with a commission-based advisor charging 2.25% total, you’ll contribute $180,000 of your own money. The advisor and fund company will take roughly $225,000 in cumulative fees – more than you personally put in. They’ll earn more from your money than you contributed to it. Let that sink in.

4. When a Financial Advisor IS Worth It

I want to be balanced here, because dismissing all financial advice is just as foolish as accepting it blindly. There are situations where professional guidance genuinely adds value – sometimes enormous value.

Complex tax situations

If you’re a business owner, have significant assets in multiple account types (RRSP, TFSA, non-registered, corporate accounts), or are navigating a major life transition like divorce or inheritance, a qualified financial planner can save you far more in taxes than they charge in fees. Tax-efficient withdrawal strategies alone can be worth tens of thousands of dollars in retirement.

Estate planning

Wills, trusts, beneficiary designations, probate planning, insurance needs – these are areas where professional advice can prevent costly mistakes. XEQT solves the “what to invest in” question, but it doesn’t solve the “how to structure your financial life” question.

Behavioural coaching

Here’s an uncomfortable truth: some people need an advisor to stop them from panicking and selling during a market crash. If having an advisor prevents you from selling your entire portfolio during a 30% drawdown, the 1% fee might actually be worth it. A good advisor who keeps you invested during a crash can save you far more than their fee costs.

The key distinction: financial planning vs. investment management

This is the distinction most Canadians miss. Financial planning – tax strategy, estate planning, insurance analysis, retirement income planning – is a genuine professional service that requires expertise. Investment management – deciding what to buy – is largely a solved problem for most people. XEQT handles the investment management piece. A good financial planner handles everything else.

Fee-only planners: the best of both worlds

If you need financial planning advice, seek out a fee-only financial planner. These professionals charge a flat fee (typically $1,500-$5,000 for a comprehensive plan) or an hourly rate ($150-$350/hour). They don’t sell products. They don’t earn commissions. Their only incentive is to give you good advice, because their reputation depends on it.

You can find fee-only planners through the Financial Planning Association of Canada or the Money Coaches of Canada directory.

Here’s what a smart approach looks like:

1. Pay a fee-only planner $2,000-$3,000 for a comprehensive financial plan
2. Implement the plan yourself using XEQT in the accounts they recommend
3. Check in every 3-5 years or when your life circumstances change significantly

Total cost over 30 years: maybe $10,000-$15,000 in planning fees. Compare that to $225,000 in ongoing advisory and fund fees. You get better advice and you keep an extra $210,000.

5. The DIY Alternative: Why XEQT Makes Advisors Unnecessary for Most People

Here’s what I’ve learned after years of writing about personal finance: most Canadians don’t need a financial advisor for their investments. They need a good product and a good habit. XEQT is the product. Automatic monthly contributions are the habit. Together, they replace roughly 90% of what most advisors do.

Let me break down why.

XEQT handles diversification

With a single purchase, you own:

• ~25% Canadian stocks (via XIC) – exposure to your home market, including banks, energy, and mining
• ~47% US stocks (via XUU) – the world’s largest economy, including Apple, Microsoft, Amazon, and thousands of others
• ~22% International developed stocks (via XEF) – Europe, Japan, Australia, and more
• ~6% Emerging market stocks (via XEC) – China, India, Brazil, Taiwan, and beyond

That’s over 9,000 individual stocks across 49 countries. No advisor is going to give you better diversification than this. They might give you different diversification – maybe more bonds, maybe a sector tilt – but for a long-term equity investor, this is as comprehensive as it gets.

XEQT handles rebalancing

As I mentioned above, XEQT automatically rebalances its underlying holdings to maintain target allocations. If US stocks surge and exceed their target weight, XEQT sells some and buys more of the underweight regions. This happens without you doing anything. No meetings, no phone calls, no decisions.

XEQT handles professional management

BlackRock, the world’s largest asset manager with over $10 trillion in assets under management, runs XEQT. Their portfolio construction team sets the allocations. Their trading desk executes the rebalancing. Their compliance team handles the regulatory requirements. You get institutional-grade portfolio management for 0.20% per year – less than a fifth of what most advisors charge just for their own fee, before any fund costs.

Wealthsimple makes buying commission-free

You can buy XEQT on Wealthsimple with zero trading commissions. No $9.99 per trade. No account minimums. No annual account fees (on basic accounts). Set up a recurring deposit and a recurring buy, and your entire investing process is automated.

The 15-minute-per-month portfolio

Here’s what my investing routine actually looks like:

1. Money is automatically deposited into my Wealthsimple account on payday (set up once)
2. XEQT is automatically purchased via recurring buy (set up once)
3. I check my portfolio maybe once a month, for about five minutes, just to confirm everything is running (optional, honestly)
4. Once a year, I check whether my overall allocation still makes sense for my age and goals (15 minutes)

Total time spent on investing: roughly 15 minutes per month. Total fees paid: 0.20%. Total advisor fees paid: $0.

An advisor would charge me 1-2% for this. In dollar terms, on a $300,000 portfolio, that’s $3,000-$6,000 per year – for a service I can replicate in the time it takes to drink a cup of coffee.

But what about taxes?

This is the one area where self-directed investors need to do a bit of homework. Which account type should you use first – TFSA, RRSP, or non-registered? How should you handle the RRSP withholding tax? What about RESP contributions for your kids?

Here’s the good news: these questions have well-documented answers. A few hours of reading (or one session with a fee-only planner) will give you a framework that works for years. The basics are straightforward:

• TFSA first for most young Canadians (tax-free growth, flexible withdrawals)
• RRSP when your marginal tax rate is high (25%+ tax bracket, or employer matching)
• RESP for your children’s education (20% government grant, up to $500/year per child)
• Non-registered for anything beyond contribution room (you’ll pay tax on capital gains, but the growth is still worth it)

That’s not comprehensive financial planning, and edge cases exist. But for 80% of Canadians in the accumulation phase, that framework – combined with XEQT – is all you need.

The Bottom Line

Financial advisors don’t recommend XEQT because the system doesn’t pay them to. Trailing commissions reward advisors for selling expensive mutual funds. AUM fees reward advisors for maintaining complex portfolios that justify ongoing charges. Simple, effective, low-cost solutions like XEQT are the enemy of both models.

This doesn’t make advisors bad people. Most of them genuinely want to help their clients. But they operate within a structure that penalizes simplicity and rewards complexity. When someone’s livelihood depends on you not discovering the simple answer, you shouldn’t be surprised when they don’t mention it.

The simple answer is this: for most Canadian investors, XEQT in a TFSA or RRSP, purchased regularly through Wealthsimple, is all you need for the investment management side of your financial life. If you need help with tax planning, estate planning, or behavioural coaching, hire a fee-only planner for a one-time engagement. Don’t pay 1-2% per year, every year, for something a $30 ETF does better.

The financial industry wants investing to feel complicated. It wants you to believe you need professional help to navigate the markets. It wants you to think that the average person can’t possibly manage their own portfolio.

They’re wrong. You can do this. Open an account, buy XEQT, set up automatic contributions, and get on with your life. Your future self – the one with an extra $200,000 in their retirement account – will thank you.

Related Reading

• What Is XEQT?
• XEQT MER: Understanding the True Cost
• The One Percent Rule: How Fees Destroy Wealth
• Can XEQT Replace a Financial Advisor in Canada?
• Wealthsimple Managed vs XEQT: Which Is Better?
• XEQT vs Robo-Advisors