8 Best Canadian Financial ETFs 2022: Invest in Banking

Canada boasts one of the strongest financial sectors worldwide. Canada’s banking sector and the broader financial services industry have the reputation of doing well during bullish operating environments.

The industries are also resilient during bearish conditions that otherwise have a significant negative impact on investor returns.

If you are interested in investing in the financial sector but don’t know where to begin, this post will make life easier for you. This article is my guide to the best Canadian financial ETFs.

ETFs, or Exchange-Traded Funds, have exploded in popularity in recent years with the advent of fintech companies offering several self-directed trading platforms, making investing an easier affair for Canadians.

It’s much easier to learn how to buy ETFs now than ever before, and the Canadian ETF market has become massive over the years.

Best Canadian Financial ETFs

What Are Canadian Financial ETFs?

ETFs are a type of investment vehicle that gives you the chance to gain exposure to a group of different securities in the form of a single investment product. These funds are traded on stock exchanges, much like an individual stock.

However, investing in ETFs is drastically different than investing in stocks.

When investing in an individual stock, you are effectively relying on investment returns based on the performance of a specific company.

Investing in an ETF means that you are diversifying your investment capital across a group of securities instead of the stock of just one company.

ETFs can track the performance of a basket of securities across several asset classes that align with a specific goal, theme, or industry.

Actively-managed funds maintain baskets of securities designed by fund managers based on their market analysis and typically come at a higher cost than passively-managed funds.

Passively-managed ETFs achieve this by replicating the performance of market indexes.

The list of Canadian financial ETFs I’m reviewing today comprises funds that emulate the performance of various market indices tracking the performance of financial sector stocks in Canada.

Best Canadian Financial ETFs

Best Canadian Financial ETFs

This section of my guide to the best Canadian financial ETFs will provide you with a listed breakdown of the funds most suitable for investors looking for exposure to the performance of the Canadian finance sector.

This list will also include a US financial ETF listed on a Canadian stock exchange, so you can also consider a financial instrument that gives you exposure to the performance of US banks.

1. BMO Equal Weight Banks Index ETF (ZEB)

BMO logo

Some key facts about BMO Equal Weight Banks Index ETF (ZEB):

  • Ticker: TSX:ZEB
  • Inception Date: October 20, 2009
  • Assets Under Management: $2.76 billion (as of January 25, 2022)
  • Management Fee: 0.28%

BMO Equal Weight Banks Index ETF (ZEB) is a fund designed to provide you with investment returns by replicating the performance of the Solactive Equal Weight Canada Banks Index before fees and expenses.

ZEB ETF invests in and holds securities in proportion to how they are held by the underlying index. The Solactive Equal Weight Canada Banks Index focuses on investing in Canada-listed securities in the country’s banking industry.

Investing in ZEB ETF offers you exposure to the performance of the Big Six Canadian banks in the form of a single financial instrument.

ZEB ETF does not allocate assets to its holdings based on the market cap of each bank stock. Instead, it focuses on offering almost equal weighting across all six.

The fund’s top holding is TD Bank, with 18.05% of its asset allocation. Scotiabank comes in second, with 17.05%. BMO comes in at third, accounting for 16.77% of its asset allocation. ZEB ETF is one of the lowest-cost funds on this list, with an MER of 0.28%.

2. CI Canadian Banks Income Class ETF (CIC)

CI Global Asset Management Logo

Some key facts about CI Canadian Banks Income Class ETF (CIC):

  • Ticker: TSX:CIC
  • Inception Date: August 18, 2010
  • Assets Under Management: $290.3 million (as of January 24, 2022)
  • Management Fee: 0.65%

CI Canadian Banks Income Class ETF (CIC) is a fund designed to provide you with investment returns by emulating the performance of the S&P/TSX Equal Weight Diversified Banks Index before fees and expenses.

CIC ETF also sells call options on 25% or less of the common shares of each banking stock held in the portfolio. CIC ETF invests in and holds assets based on how they are held in the S&P/TSX Equal Weight Diversified Banks Index.

The underlying index holds the top six banks with an equal weighting instead of basing it off of their market capitalizations.

Investing in CIC ETF offers you equal-weighted exposure to the Big Six banks while offering you distributions enhanced through the fund manager’s covered calls strategy, making it more expensive with an MER of 0.65%.

The fund’s top holding is the Royal Bank of Canada, with 17.23% of its asset allocation. CIBC comes in second, with 17.16% of its asset allocation. Bank of Montreal is third, accounting for 16.72% of its asset allocation.

3. BMO Covered Call Canadian Banks ETF (ZWB)

BMO logo

Some key facts about BMO Covered Call Canadian Banks ETF (ZWB):

  • Ticker: TSX:ZWB
  • Inception Date: January 28, 2011
  • Assets Under Management: $2.72 billion (as of January 25, 2022)
  • Management Fee: 0.72%

BMO Covered Call Canadian Banks ETF (ZWB) is a fund designed to provide you with investment returns by tracking the performance of the Big Six Canadian banks while enhancing your returns through call option premiums.

ZWB ETF is a fund of funds that holds ZEB ETF as one of its primary holdings, and it dynamically writes covered call options for its constituent securities.

The fund manager writes call options out of the money and selects them based on analyzing the option’s implied volatility.

The actively-managed fund is a more expensive way to gain exposure to returns from the Canadian banking sector’s performance, with an MER of 0.72%. However, it can provide enhanced returns through its covered call strategy.

ZWB ETF’s top holding is ZEB ETF, accounting for 25.23% of its asset allocation. TD Bank stock comes in second, accounting for 13.57% of its asset allocation. Scotiabank comes in third, accounting for 12.93% of its asset allocation.

4. RBC Canadian Bank Yield Index ETF (RBNK)

Some key facts about RBC Canadian Bank Yield Index ETF (RBNK):

  • Ticker: TSX:ZWB
  • Inception Date: January 28, 2011
  • Assets Under Management: $2.72 billion (as of January 25, 2022)
  • Management Fee: 0.72%

RBC Canadian Bank Yield Index ETF (RBNK) is a fund that seeks to provide you with investment returns by emulating the performance of the Solactive Canada Bank Yield Index.

RBNK ETF invests in and holds securities in the proportion they are held in the underlying index. The fund focuses on providing you with exposure to the performance of a portfolio of Canadian bank stocks.

Solactive Canada Bank Yield Index tracks the performance of the Big Six Canadian banks.

]Investing in RBNK ETF offers you a narrow exposure to the top financial institutions in the country. The portfolio is weighted based on each constituent security’s indicated dividend yield instead of market capitalization. RBNK ETF comes with an MER of 0.72%.

The fund’s top holding is Scotiabank, accounting for 25.6% of its asset allocation. CIBC comes in second, with 24.6% of its allocation. TD Bank is its third-largest holding, accounting for 17.2% of its asset allocation.

5. iShares S&P/TSX Capped Financials Index ETF (XFN)

ishares logo

Some key facts about iShares S&P/TSX Capped Financials Index ETF (XFN):

  • Ticker: TSX:XFN
  • Inception Date: March 23, 2001
  • Assets Under Management: $1.8 billion (as of January 25, 2022)
  • Management Fee: 0.61%

iShares S&P/TSX Capped Financials Index ETF (XFN) is a fund designed to provide you with investment returns by tracking the performance of the S&P/TSX Capped Financials Index before fees and expenses.

XFN ETF invests in and holds securities in proportion to how they are held in the underlying index.

S&P/TSX Capped Financials Index focuses on measuring the performance of the Canadian financial sector equity securities that are in the S&P/TSX Composite Index and the relative weight of any single index constituent security is capped.

The fund offers you broader exposure to the Canadian financial services industry and comes with an MER of 0.61%.

XFN ETF’s top holding is the Royal Bank of Canada, accounting for 20.18% of its asset allocation. TD Bank comes in second, with 17.86% of its asset allocation. Scotiabank comes in third, with 10.68% of its asset allocation.

6. iShares Equal Weight Banc & Lifeco ETF (CEW)

ishares logo

Some key facts about iShares Equal Weight Banc & Lifeco ETF (CEW):

  • Ticker: TSX:CEW
  • Inception Date: February 06, 2008
  • Assets Under Management: $236 million (as of January 25, 2022)
  • Management Fee: 0.61%

iShares Equal Weight Banc & Lifeco ETF (CEW) is a fund that seeks to provide you with investment returns by tracking the performance of an equal-weighted portfolio of common shares of the largest Canadian banks and life insurance companies.

You can use CEW ETF to express a sector view of the broader financial services industry in Canada. The fund also seeks to provide you with investment returns through regular monthly dividend income.

The fund focuses on allocating its assets under management to financial sector stocks that pay regular dividends. It does not invest in and hold its constituent securities based on their respective market capitalizations. CEW ETF comes with an MER of 0.61%.

The fund’s top holding is Great West LifeCo Inc., accounting for 10% of its asset allocation. National Bank of Canada stock comes in second, accounting for 9.96% of its asset allocation. IA Financial Inc. is its third-largest holding, with 9.95% of its asset allocation.

7. iShares Canadian Financial Monthly Income ETF (FIE)

ishares logo

Some key facts about iShares Canadian Financial Monthly Income ETF (FIE):

  • Ticker: TSX:FIE
  • Inception Date: April 16, 2010
  • Assets Under Management: $963 million (as of January 25, 2022)
  • Management Fee: 0.82%

iShares Canadian Financial Monthly Income ETF (FIE) is a fund that seeks to provide you with investment returns by maximizing the potential total returns and offering you a stable stream of monthly cash distributions.

FIE ETF is an actively managed fund that does not track or attempt to outperform an underlying index.

It means that the fund is more expensive to own, and it comes with an MER of 0.82%, making it the costliest ETF in this guide to the best Canadian financial ETFs.

FIE ETF boasts a diversified portfolio consisting primarily of common shares, preferred shares, corporate bonds, and income trust units of Canadian financial sector issuers.

Investing in FIE ETF offers you the opportunity to generate regular monthly income through the distributions of the constituent securities. FIE ETF is a fund of funds that invests in other ETFs to achieve its investment goals.

FIE ETF’s top holding is BlackRock iShares CPD ETF, accounting for 21.10% of its asset allocation.

iShares XCB ETF comes in second, accounting for 10.56% of its asset allocation. CIBC stock is its third-largest holding, with 8.70% of its asset allocation.

8. RBC US Banks Yield (CAD Hedged) Index ETF (RUBH) – US Financial ETF Canada

Some key facts about RBC US Banks Yield (CAD Hedged) Index ETF (RUBH):

  • Ticker: TSX:RBUH
  • Inception Date: May 15, 2018
  • Assets Under Management: $8.14 million (as of January 24, 2022)
  • Management Fee: 0.32%

RBC US Banks Yield (CAD Hedged) Index ETF (RUBH) is a fund that seeks to provide you with investment returns by replicating the performance of the Solactive US Banks Yield NTR Index hedged to the Canadian dollar to minimize your exposure to the risks of currency fluctuations between the US dollar and the Canadian dollar before fees and expenses.

RBUH ETF offers you the opportunity to diversify your portfolio by offering you exposure to the US banking sector by investing and holding US-listed stocks in proportion to how they are held in the underlying index.

The Solactive US Banks Yield NTR Index is intended to track the price movement of the 21 largest banks in the US.

Some of the fund’s top holdings include M&T Bank Corp., accounting for 8.3% of its asset allocation, Fifth Third Bancorp, accounting for 7.6% of its asset allocation, and Zions Bankcorp NA, accounting for 7.3% of its asset allocation. RBC RUBH ETF is a relatively higher-cost fund with an MER of 0.32%,

How To Buy The Best Canadian Financial ETFs In Canada

The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:

ImageProduct TitleFeaturesPrice
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Wealthsimple Trade
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Questrade
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To learn more, check out my full breakdown of the best trading platforms in Canada here.

Conclusion

ETFs have become extremely popular in recent years, providing Canadian investors an easier method to invest in a diversified group of securities to mitigate capital risk and offer the convenience of hands-off investing at a low cost.

My breakdown of the best Canadian financial ETFs covers a broad range of equity securities in the broader financial sector.

However, if you are an investor interested in narrowing your focus on Canadian banking stocks, check out my breakdown of the best Canadian bank ETFs in Canada to view a list of financial ETFs that focus on the banking industry.

If you want to go the route of a self-directed investor and curate a portfolio of financial stocks by picking the top Canadian bank stocks, check out my guide to the best Canadian bank stocks for stability and dividends.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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