In June 2026, the Vanguard S&P 500 ETF (VOO) became the first ETF to surpass US$1 trillion in assets. In other words, the largest U.S. ETF alone is now bigger than Canada’s entire ETF industry.
Canadian investors are not limited to products listed at home. Most self-directed brokerages provide access to both Canadian- and U.S.-listed ETFs, creating a recurring question: when is it worth accepting the added complexity of a U.S. ETF?
Canadian-listed ETFs are generally easier to buy. They trade in Canadian dollars, avoid an up-front currency conversion, and provide an increasingly broad range of investment choices. However, U.S.-listed ETFs can sometimes offer lower expense ratios, greater liquidity, and access to strategies or asset classes that have no close Canadian equivalent.
Whether those advantages translate into better net returns depends largely on four variables: the cost of converting Canadian dollars into U.S. dollars, the foreign withholding tax treatment of distributions, the difference in expense ratios, and potential U.S. tax filing obligations.
Brokerage foreign exchange costs can make or break the decision
The biggest advantage Canadian-listed ETFs have is accessibility. Most Canadians earn their income in Canadian dollars, deposit those funds into their brokerage accounts, and can immediately purchase Canadian-listed ETFs at the lowest tier of trading fees without worrying about currency conversion.
Buying a U.S.-listed ETF adds another step. Because the ETF trades in U.S. dollars, you first need to convert your Canadian dollars. That conversion is rarely free. Most brokerages earn money by charging a foreign exchange spread. Rather than converting your money exactly at the prevailing spot exchange rate, they add a markup.
Depending on the brokerage, this cost may be expressed as a percentage of the transaction value, a flat fee, or a combination of both. While it may seem small on an individual trade, foreign exchange costs can materially increase your total cost of ownership, especially if you are regularly contributing.
Rather than compare every brokerage available to Canadians, it is more useful to look at two popular examples that illustrate how dramatically pricing can differ: Interactive Brokers vs. Wealthsimple.
X
Interactive Brokers is generally one of the least expensive options for investors purchasing U.S.-listed securities. U.S. stock commissions begin at US$0.0035 per share, subject to a minimum commission of US$0.35 per order.
Currency conversion is also 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 charge of US$2 per conversion. For larger transactions, the foreign exchange cost is effectively negligible.
Contrast that with Wealthsimple, one of Canada’s most popular commission-free brokerages. Investors purchasing U.S.-listed securities directly from a Canadian-dollar account pay a 1.5% currency conversion fee on every conversion between Canadian and U.S. dollars.
Wealthsimple does offer U.S.-dollar accounts, allowing investors to hold U.S. cash without repeatedly converting after every purchase, sale, or dividend payment. However, unless you qualify for Premium by maintaining at least $100,000 in assets, access costs $10 per month.
Even with a U.S.-dollar account, converting Canadian dollars into U.S. dollars still carries a fee based on Wealthsimple’s corporate exchange rate. The conversion spread is tiered at 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% on amounts of $100,000 or more.
It is also worth remembering that these rates apply on top of Wealthsimple’s own corporate exchange rate rather than the Bank of Canada’s published daily exchange rate.
For newer investors using Wealthsimple with relatively small account balances, paying a 1.5% currency-conversion fee simply to access a U.S.-listed ETF is often difficult to justify. The math changes with lower-cost brokerages such as Interactive Brokers. When currency conversion costs are measured in only a few dollars rather than a percentage of the transaction, the cost hurdle largely disappears.
My view is straightforward: if your brokerage imposes high foreign-exchange fees, Canadian-listed ETFs will usually offer better value despite slightly higher management fees. If your brokerage allows you to convert currency cheaply, particularly for larger transactions, U.S.-listed ETFs become much more compelling and are often worth considering.
-1024x683.jpg "Midterm Battle Lines Drawn in Arizona")
