This podcast is being brought to you by John Hancock Investment Management Distributors LLC, member FINRA, SIPC. The views and opinions expressed in this podcast are those of the speakers, are subject to change as market and other conditions warrant, and do not constitute investment advice or a recommendation regarding any specific product or security. There is no guarantee that any investment strategy discussed will be successful or achieve any particular level of results. Any economic or market performance information is historical and is not indicative of future results, and no forecasts are guaranteed. Investing involves risks, including the potential loss of principal.

JHS-1024920-2026-10-21 MF6044969 11/26

00;00;03;24 - 00;00;24;25

John Bryson

Hello, everyone, and welcome to the Portfolio Intelligence Podcast. I'm your host, John Bryson, head of investment consulting and education savings at Manulife John Hancock Investment. Today is October 16th, 2026. And as we're just kicking off the fourth quarter, we think it's an especially important time to talk about how to keep clients, help clients, keep more of their returns.

00;00;24;28 - 00;00;46;22

John Bryson

Today we're going to talk through the ETF market, why tax efficiency is one of the most compelling benefits of the ETF structure, and how you can put that efficiency to work this year. To help me with the conversation is Steve Deroian, global head of exchange traded products and models, and Brad Feeley, head of ETF and model portfolio sales, both at Manulife, John Hancock Investments.

00;00;46;22 - 00;00;49;06

John Bryson

Steve, Brad, welcome to the podcast.

00;00;49;08 - 00;00;52;16

Brad Feeley/Steve Deroian

Thanks, John. Yeah John, appreciate being here.

00;00;52;18 - 00;01;03;00

John Bryson

You got it. Hey, Steve, I want to start with you. Let's kick this off. It's been a robust year in the ETF industry. Can you give us a refresher on what the ETF industry looks like today?

00;01;03;04 - 00;01;47;17

Steve Deroian

Yeah John, I mean I've, it's, it's funny, I've been at this for a long time in the ETF space. And I'm coming upon my, next year, will be my 20th year in in the ETF industry. Which, it's almost fascinating to me to see, the consistent growth that we've had during these two decades. We're up to $15.5 trillion in assets, according to Morningstar. Morningstar is also quoting something like 5,600 ETFs now in the U.S., which is a staggering amount. I mean, I remember when we were in the hundreds. So, so to see that type of growth from an asset perspective and a product perspective has been sort of crazy. And I've had a sort of a front row seat to it all.

00;01;47;20 - 00;02;24;27

Steve Deroian

What I think is, is really also amazing has been just record after record when it comes to flows, when you when you look at, you know, Morningstar data, you'll see, you know, 20, 25. I think we ended somewhere around, you know, 1.3, 1.4 trillion in assets, right? Right around the midpoint there at 1.35, I believe. And, when you think about where we are today, if you looked through the first three quarters here at the end of September, we're already over 1.5 trillion. So, this train is not slowing. It's picking up speed.

00;02;25;04 - 00;03;12;07

Steve Deroian

And, and part of that speed I think has been the active ETFs. And, you know, that part of the, the ETF market, you know, everybody always asked me, you know, what inning are we in? What inning are we in? In this, you know, this ETF game. And you know I, I when I first started, I was I was like I don't know, inning two, inning three? I don't even know if we're out of the first inning because it just every, every time I think we get, you know, six outs, you know, six more outs seem to be added to the game. And the game just gets longer and longer, and we just keep growing and growing. So, active ETFs last year had, had about accounted for about 31% of those flows that I mentioned. So, just an awesome story in 2025 and continuing on in, in 2026 as well. And, and I think the future is super bright.

00;03;12;07 - 00;03;41;09

Steve Deroian

We're, you know, looking at a survey over the last year from Track Insight and that survey said about 70% of advisors said they plan to increase their exposure to active ETFs, not generally, but in the next six months, John. So, these are real-time decisions that advisors are facing. And they're choosing active. And they're choosing active ETF at an extremely high clip right now.

00;03;41;12 - 00;04;01;03

John Bryson

Yeah, I mean you said you've been in the industry for 20 years. It was a passive story for the longest time. But the active exposure now in ETFs has really accelerated the business. So, if, if we continue to think about the market, remind us, what are the ETF structural benefits that's driving the growth in the conversation around advisors.

00;04;01;20 - 00;04;38;07

Steve Deroian

So many benefits that are average on, and, and you know, one of the things I love about it is the democratization of investing that I think ETFs have brought to the table. It's really made it simple and easy for any investor, almost of any size, to participate in the market. But, you know, I think when we talk about the absolute growth, there's probably three, three major factors. One is the one we already talked about the rise of active ETFs. And just the continued sort of shift, mind shift of advisors and individual investors into the structure, even for active investing. As you said, for a long time, it was a passive story.

00;04;39;04 - 00;05;30;03

Steve Deroian

Two is the continued focus on cost. The wrapper is more efficient from a cost perspective, generally speaking. It tends to be a lower-cost vehicle for most, whether passive or active, so it's a great opportunity. And finally, the increased awareness around taxes: As we come here into Q4, I mean, I think everybody gets more laser-focused on taxes in Q4. But for those of us who have been in the ETF space, we, we focus on it every day in ETF-land. And because the ETF is run in a more tax-efficient manner, it has allowed for clients to get more control of their own taxes and take their situation in mind when investing in a more simplified manner because of the ETF wrapper.

00;05;30;04 - 00;05;59;21

John Bryson

Nice. So, Brad, I want to pull you into the conversation. As head of ETF and Model Portfolio sales, you're in the middle of a lot of the conversations, whether it be with the Home Office, due diligence teams, RIA advisors at RIA houses or independents. You know, let's go a little bit deeper. One of the catalysts that Steve mentioned in unlocking ETF usage is the, typically they have lower costs than mutual funds. Shed some light on us on how the conversations are going with all the different counterparties you work with.

00;05;59;20 - 00;06;59;07

Brad Feeley

Yeah great. Thanks John and Steve. Wonderful setup here. You know, I would characterize the conversation as: the conversation used to be more of a binary decision around cost. You know, as you think about it historically, within the ETF market, has historically been passive investing. A passive indexing approach is really the lowest-cost mandates you can, you can find. So the due diligence conversation was like, okay, are we moving to the lowest cost option or are we accepting a higher-cost vehicle with an active approach? And you know, maybe we are blending the two of those together to control cost. Now, again, hitting back on the active rise, the rise of active ETFs as they've entered the market they've matured. You're seeing more of an apples-to-apples comparison now on an AUM perspective and track record perspective. So, as we go to the cost conversation, we're seeing that cost more, more on a spectrum, right?

00;06;59;06 - 00;07;44;16

Brad Feeley

You know, if we look at, according to Morningstar data, end of May, apples-to-apples, as Steve mentioned, ETFs tend to be cheaper than active mutual funds in similar categories. So, what I, when I look at large-cap equities, U.S. large-cap equities, to put a pin in it, an active ETF expense ratio, their average expense ratio is about a third cheaper than the average mutual fund expense ratio. So as we, as we start to unpack, maybe some of the opportunities for why active ETFs are coming into the market, this, this cost spectrum is one of those. And then as we go into the fourth quarter. Money's moving. Advisors are making more decisions towards the end of the year. Definitely been a catalyst to, to drive the due diligence conversation.

00;07;45;08 - 00;07;57;07

John Bryson

So, let's, let's continue that. Brad. Steve mentioned that tax efficiency is a key catalyst driving ETF adoption. How is that coming up in conversations, and how is that driving the conversation, especially in Q4?

00;07;58;01 - 00;09;15;09

Brad Feeley

Yeah. I love this quote, and I say it often. So, it's from Cerulli's 2024, a little bit dated, but I would assume the numbers even get better. But part of their, their broad advisor outreach; 73% of high net worth practice management executives ranked tax minimization as a very important client objective, and it was tied number one priority with wealth preservation. So, if you think about clients and their emphasis on taxes and keeping more of taxes, it goes side by side with their wealth profile. So, all this has shown to me is clients want this better tax experience and ETFs can be part of that experience, again, definitely relative to mutual funds, Morningstar has a great data point that we reference often in the due diligence conversation. It's called their tax cost ratio. It's available right on morningstar.com. But tax cost ratio quantifies how much a fund's annualized pretax return is reduced by taxes. And as a refresher, why do we pay taxes on on our investments. We pay taxes on distribution. So, whether that's, you know, dividend or income, you're going to pay taxes on that. And if there's a capital gain distribution, you're going to pay taxes on that.

00;09;15;24 - 00;10;23;14

Brad Feeley

We haven't really broached the topic of the number of, of ETFs versus the number of mutual funds that pay annual capital gains, but the numbers are very eye opening. And if you look at that, that tax drag, write that tax cost ratio over the last three years. Again, according to Morningstar, the average tax cost ratio for US equity mutual funds is 1.55%. So, every year, 1.55% comes off your, your return because you have to pay taxes, on average. That same number for US equity ETFs, a comparable bucket is 0.48. So almost a 1.0, a like almost, a full, it is a full 1% difference in annualized returns. So, bringing this back to the due diligence conversations with advisors and building better portfolios and that consultative approach. The difference in after tax returns can be substantial in some cases and is very much a talking point of why we're seeing this adoption and these catalysts for adoption for ETFs continue.

00;10;24;19 - 00;11;04;12

John Bryson

I mean, it's really compelling. We've talked a lot from the investment consultant standpoint around, you should have active and passive and multifactor in your portfolio. You should leverage the tools like mutual funds or ETFs that are going to help you deliver first, returns and second after, after tax returns, because it's what you keep. So now the landscape has really evolved where you've got so many options. And that big difference, like you said, almost a percentage point higher. And after tax returns that pays off in the long term. So, Brad, now that we're in Q4, get a little tactical. Where are you seeing opportunities for advisors to help improve their clients after-tax situation?

00;11;05;05 - 00;11;48;28

Brad Feeley

Yeah, it's, it's what we're working on every day right now. But I would say every conversation is unique. And you should be talking to a true tax professional on, on the ins and outs. But if I had a, if I give you two ideas of where these conversations are centered, I would be, one, the idea of tax loss harvesting. We've been in such great markets the last few years, offsetting gains has been difficult. And with the rise of interest rates through the summer, we're helping advisors examine their fixed income holdings to see if there's potential to, to tax-loss that, and maybe move to the ETF structure or another investment vehicle, to capture that loss. And then we're combining those tax loss harvesting conversations. With the idea of, of looking at equity mutual funds.

00;11;49;01 - 00;12;28;05

Brad Feeley

And as equity mutual funds start to begin to disclose their year-end capital gain distributions. Is there an opportunity to sit down with individual clients to say, hey, you know, this fund is paying a capital gain, just maybe something we we don't want to, to, to realize. So is there an opportunity to swap into a different vehicle or different structure? So, there's a lot to unpack in those two individual ideas, but that's where your team comes into place. That's where our, our field specialists, we have ETF specialists in the field come into place. We're sitting down across the table with financial advisors every day and lending our insight there.

00;12;28;20 - 00;12;54;28

John Bryson

That's great. That's great. And to our financial advisor listeners, you can reach out to your local business consultant and they can line up my team, Brad's team. That's what we want to do. We want to make this easy for you all to execute at the client level. So, Steve, let's go back and talk to us about a little bit of a history lesson. Where has Manulife John Hancock Investments been in the ETF market? And then looking forward, what gets you excited about this industry?

00;12;54;43 - 00;13;35;16

Steve Deroian

I'm, it's a pleasure to be with you guys. It's two of my favorite people in the industry, and to get to work with you guys every day is, is awesome. We've built a lot of stuff together. And part of that has been this franchise at John Hancock. I think when you look at our history, we've been at the ETF game here for over ten years now. We've grown the business to about 15 billion in assets and we're up to 20 ETFs. What's been great about the maturation of our business has been it's, it's started a little bit kind of John, what you said, you know, we started out really more in the, in the smart beta kind of systematic space with our lineup that focuses with our partner dimensional funds.

00;13;36;04 - 00;14;22;21

Steve Deroian

And from there, we've built out an active franchise starting first on the equity side, excuse me, on the fixed income side and then moving over to the equity side. So today we look at products across the landscape from our smart beta type products that cover the, the US markets, international markets, in the EM markets. We look at products on the active side from firms like Boston Partners, who's one of our major sub advisors on both the mutual fund side and on the ETFs side. And we have coverage in a large US, large cap, us a senior and international. And then we look at our fixed income lineup which is very robust. I think we're, we're probably most excited about kind of that lineup.

00;14;22;27 - 00;15;16;24

Steve Deroian

Along with our Boston Partners products. When you look at our our lineup on the fixed income side, we have so much of the board covered with a high yield product, a core and a core plus product, even a senior loan product. Not to mention some more sort of smaller areas covered like mortgages, mortgage backs and, and preferreds, as well as our corporate bond ETFs. So, so many spaces covered right now I think 2027 is going to be amazing. I think we can't sleep on the end of 2026, though. We know we're going to hit new records as a firm and as an industry. And I think that, you know, the, the lineup is really positioned to help clients solve their problems, whether they be, you know, kind of how do I save for the future? How do I live in retirement? Or, you know, how do I just do a little bit better, you know, today than I did yesterday when it comes to my investing?

00;15;16;27 - 00;16;14;25

John Bryson

It's great stuff. You know, when we started this podcast, the goal was to help advisors deliver better outcomes for their clients and for their practice. I think the evolution in the ETF space certainly helps. We now have more and more opportunities to get exposures through mutual funds or ETFs to all the different asset classes you want exposure to. You can go passive. You can go active. I would encourage our listeners take a look at the active ETF lineup now available through Manulife John Hancock Investments and other providers, because there's a lot of unique tools out there that can help you drive better returns, both pre-tax and most importantly, after tax. So, take a look. I want to thank Brad and Steve for being on. It's always great to connect with you too folks. If you want to learn more, you can check out our website. And as always, please subscribe to the Portfolio Intelligence Podcast wherever you listen to your favorite podcasts. And as always, thanks so much for listening to the show. Have a great afternoon.

00;16;17;21 - 00;16;45;27

John Bryson

This podcast is being brought to you by John Hancock Investment Management Distributors, LLC, member FINRA, SIPC. The views and opinions expressed in this podcast are those of the speaker, are subject to change as market and other conditions warrant and do not constitute investment advice or a recommendation regarding any specific product or security. There's no guarantee that any investment strategy discussed will be successful or achieve any particular level of results.

00;16;46;00 - 00;16;57;28

John Bryson

Any economic or market performance information is historical and is not indicative of future results, and no forecasts are guaranteed. Investing involves risks including the potential loss of principal.

00;16;58;02 - 00;17;23;22

John Bryson

Copyright 2026 Morningstar. All rights reserved. The information contained herein is 1) proprietary Morningstar and its providers. 2) May not be copied or distributed, and 3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.