In June 2026, the Vanguard S&P 500 ETF (VOO) became the primary ETF to exceed $1 trillion in assets. In other words: the biggest US ETF alone is now larger than the whole ETF industry in Canada.
Canadian investors are usually not limited to domestically listed products. Most self-managed brokers offer access to each Canadian and US-listed ETFs, which raises a perennial query: When is it price taking over the added complexity of a US ETF?
ETFs listed in Canada are generally easier to buy. They trade in Canadian dollars, avoid prior currency conversion and offer an increasingly big selection of investment options. However, US-listed ETFs can sometimes offer lower expense ratios, higher liquidity and access to strategies or asset classes that shouldn’t have a comparable Canadian counterpart.
Whether these advantages lead to higher net returns depends largely on 4 variables: the associated fee of converting Canadian dollars to U.S. dollars, the foreign withholding tax treatment of distributions, the difference in expense ratios, and possible U.S. tax filing requirements.
The cost of the foreign exchange broker could make or break the choice
The biggest advantage of Canadian-listed ETFs is accessibility. Most Canadians earn their income in Canadian dollars, deposit these funds into their brokerage accounts, and may immediately purchase Canadian-listed ETFs at the bottom trading fees without having to fret about currency conversion.
Buying a US-listed ETF is one other step. Since the ETF is traded in US dollars, you’ll first have to convert your Canadian dollars. This conversion is never free. Most brokers become profitable by charging an exchange rate spread. Instead of exchanging your money exactly on the prevailing spot rate, a markup is added.
Depending on the brokerage firm, these costs could also be expressed as a percentage of the transaction value, a flat fee, or a mix of each. While it could appear small on a single trade, forex costs can significantly increase your total cost of ownership, especially when you contribute recurrently.
Rather than comparing all brokers available to Canadians, it makes more sense to take a look at two popular examples that illustrate how dramatically prices can vary: Interactive Brokers vs. Wealthsimple.
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Interactive Brokers is usually one of the cost-effective options for investors purchasing US-listed securities. US stock commissions start at $0.0035 per share, subject to a minimum commission of $0.35 per order.
Currency conversion can be inexpensive, with a fee of 0.2 basis points (a basis point is 1/100 of 1%, so 0.2 basis points is 0.002%) of the trade value, subject to a minimum fee of $2 per conversion. For larger transactions, the exchange rate costs are practically negligible.
Compare that to Wealthsimple, one in all Canada’s hottest commission-free brokers. Investors who purchase U.S.-listed securities directly from a Canadian dollar account pays a 1.5% currency conversion fee on any conversion between Canadian and U.S. dollars.
Wealthsimple offers US dollar accounts so investors can hold US money without having to repeatedly convert it after every purchase, sale or dividend payment. However, unless you qualify for Premium and have assets of at the very least $100,000, access costs $10 per 30 days.
Even with a US dollar account, converting Canadian dollars to US dollars incurs a fee based on Wealthsimple’s corporate exchange rate. The conversion range is 1.5% for transactions under $10,000, 1.0% for transactions between $10,000 and $24,999.99, 0.5% between $25,000 and $99,999.99 and 0% for amounts of $100,000 or more.
It also needs to be remembered that these rates are along with Wealthsimple’s proprietary exchange rate and never the Bank of Canada’s published every day exchange rate.
For newer investors using Wealthsimple with relatively small account balances, paying a 1.5% currency conversion fee simply to access a US-listed ETF is usually difficult to justify. With lower-cost brokers like Interactive Brokers, the calculation changes. When currency conversion costs are measured in only just a few dollars somewhat than a percentage of the transaction, the associated fee hurdle largely disappears.
My view is evident: in case your broker charges high foreign exchange fees, Canadian-listed ETFs are inclined to offer higher value despite barely higher management fees. If your broker means that you can exchange currencies inexpensively, especially for larger transactions, US-listed ETFs turn out to be rather more attractive and are sometimes price considering.
