ETFolios: portfolios engineered for performance; this web based service creates customized portfolios for individual investors - Exchange Traded Funds

As most of you are certainly aware, the benefits of ETFs are numerous -- rockbottom management fees, real-time pricing, fully disclosed portfolios, pure asset pools, and excellent tax-efficiency compared to conventional, actively managed funds. Accessing a market (long or short) or merely a slice is quite simple. Once you zero in on the asset class, you're left with a handful of choices at most. However, the problem I hear most often is, "How do I intelligently assemble a portfolio, customized to my needs, out of the 120 plus and counting North American ETFs available to me?" ETFolios may be your solution.

Guardian Capital Advisors Inc. (GCA) has designed a state-of-the-art asset allocation service that harnesses the power of ETFs and is available to do-it-yourself investors (financial advisers may also recommend ETFolios, charging a fee for their services). GCA is a wholly owned subsidiary of Guardian Capital Group, an institutional portfolio manager with $11 billion in assets, founded in 1962. GCA, the firm's high net worth division, started in 1992 to cater to clients with assets of $1 million and more. "We think the individual investor deserves the same opportunity for efficiency and cost-effectiveness enjoyed by large institutions," says Sri Iyer, Manager of Portfolio Engineering at GCA.

ETFolios is a Web-based service that gives investors with a minimum of $50,000 ETF portfolios customized to their individual risk tolerance investment objectives. The ETFolios are rebalanced automatically. The first step is an on-line risk profile questionnaire that is augmented by personal professional assistance. This determines the proper "strategically managed" asset mix, which can be adjusted to complement an existing portfolio. Clients can view their portfolio, daily performance and other information online.

Guardian charges a management fee of 1%. The investor is also responsible for the trading commissions and MERS of the underlying ETFs. Iyer estimates that commissions to initially set up a typical portfolio of seven ETFs will run in the $300 range, based upon $29 per transaction at E*TRADE Canada, the broker providing exclusive trading and custodial services for ETFolios. After that, trading costs are kept to a minimum as transactions are generally just a result of rebalancing or tax loss harvesting. The weighted average MERs of most portfolios is approximately 0.25% or 25 basis points. Given that the 1% fee is deductible for taxable accounts, the after-tax annual fee for an investor in the highest bracket in Ontario would be less than 80 basis points.

The ETFolios program is a cutting-edge advance over mutual fund or 'wrap' portfolios for investors that meet the fairly low minimum investment. The goal is to deliver more consistent performance and be more tax efficient than these traditional choices. According to Mark Yamada, Managing Director, GCA, "We like to think of ETFolios as empowering the individual investor." To open an account or obtain more information, visit the company's Web site at www.etfolios.com.

Howard Atkinson, CFA, CIMA, is author (with D. Green) of The New Investment Frontier: A Guide to Exchange Traded Funds for Canadians. He is also the National iUnits Marketing Manager at Barclays Global Investors Canada, Ltd. Phone 416-594-4404.

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