Uh, it's easy to explain that when a client invests in a mutual fund, the fund issues more units to sell to new investors and buys back units from investors who want some/all of their money back. In all transactions, you always trade at a price equal to the value of the investments held in the fund. Simple and easy to understand.
ETFs don't work this way. I'll give you a test, if you choose to take it. How would you explain, in plain English, how creation units facilitate in and out flows and how arbitrageurs keep the price as close to NAV as possible even though you risk paying more on buys and getting less when selling. And before you chalk this up to a useless nuance this speaks to the risk of trading at a discount or premium - and it can be significant with ETFs investing in less liquid securities.
While reminds me of the other myth with ETFs. Try explaining the liquidity risk with ETFs and how it doesn't matter how many ETF units trade.
Conceptually, in broad terms, you're right. But there are issues that clients need to be familiar with if you're going to cover your *** (a reality for those of us with a license and an obligation to not only know your client but know your product). Look, this doesn't make ETFs inferior or anything like that. But let's face it, they are structurally more complex than mutual funds - and that has pros and cons.
But back to the original issue....it's not a matter of who's better but which is most suitable to the beginner investor. You have to admit that it's MUCH easier and convenient to walk into your local RBC bank branch, drop a cheque in front of the account manager, fill out the application, and invest in the RBC Monthly Income fund than it is to buy ETFs.
Somebody mentioned streetwise funds, which is fine but it costs the same as the two funds I suggested early in this discussion. Compare that with the time to set up your DIY brokerage account, get online access, search for symbols, and start trading (and do so without getting sucked into the loser's game of starting to buy penny stocks and the IPOs the broker will advertise and the Agriculture ETF and the double short natural gas ETF and so on), investigate the DRIPs and sign up for those, etc. It's a cake walk for savvier investors but it's a lot of work for beginners, not to mention intimidating.
If all you've ever done is buy GICs and savings bonds, jumping straight to stock trading is too big of a jump unless the person in question has really ramped up on their knowledge. Kind of like moving out of your parents' home. For a lot of people, they should rent for six to twelve months to ease into the responsibilities and financial burden of buying a home.