IFIC Survey Gives Voice to Canadian Investors
Author: Blake C. Goldring
October 18, 2018
The Investment Funds Institute of Canada (IFIC) and Pollara Strategic Insights recently released the results of their annual survey of mutual fund investors – the Canadian Mutual Fund Investor Survey*. Like in previous years, the survey was designed to provide better data around the attitudes and opinions of Canadian mutual fund holders, to identify their needs, expectations, behaviours and opinions. Overall, the findings of the 2018 survey are not surprising. The results echo what we are seeing in other industry surveys and reinforce what we are hearing from our own clients.
This annual survey gives Canadian investors a strong voice during a time of debate and consultation within our industry. With submissions on client-focused reforms due to the Canadian Securities Administrators (CSA) on October 19 it also gives regulators another opportunity to hear directly what is being said by investors in discussions related to the role of the advisor and knowledge of fees.
Investors are highly satisfied with their advisors
When it comes to working with an advisor, the survey results showed that 86% of respondents work with an advisor for at least part of their investments, and half (51%) work with one advisor for all of their investments. What’s more, 85% of the surveyed investors agreed that they “would not want to handle my investment on my own”.
Given the trust investors place in their advisors, we were pleased – but not surprised – to see that satisfaction with advisors is very high (95%), which is consistent with most previous years, and an overwhelming majority (78%) report they are “completely satisfied” or “satisfied” with the advice provided.
AGF has always been a strong advocate for the value of financial advice, and these findings from Pollara Strategic Insights support previous research that demonstrates: Canadians who work with an advisor build more savings over time and are better positioned to meet their long-term investing goals. In fact, more than three-quarters (78%) of the surveyed investors specifically reported having better saving and investment habits because of their advisors.
Interestingly, a previous Pollara study** showed that client-advisor relationships are long-lasting relationships that begin at an early age – i.e. when wealth is not well established for most people – and continue throughout life. The research showed that on average, investors under 35 first started using an advisor at just over 21 years of age and have been using an advisor for 8.4 years.
This is an important finding, as these relationships began when the investor’s account size was likely small, and their investing knowledge in critical need of nurturing. Reforms contemplated by Canada’s securities regulators regarding the nature of the client-advisor relationship must ensure that these investors – i.e. those only beginning their path toward their long-term financial goals – are not displaced or delayed access to advice. The notion that smaller investors can be serviced through other means, namely online tools like robo-advice or self-directed platforms, until such a time that their wealth justifies – or meets the minimum requirements of – an advisor is misplaced. Not surprisingly, the survey also found that usage of and interest in these types of online tools continues to be low, with most preferring to use the services of a human advisor.
Delaying access until investors have sufficient assets to be serviced may leave Canadians without crucial guidance during their critical saving years.
Advisors are worth their fees
In the broader conversation around mutual funds in Canada, much emphasis is placed on the belief that better investment outcomes for clients are most attainable through low cost products and lower fees. In effect, it would appear that the value of advice is being lost as a key driving investment principle.
Consider the range of options we have when it comes to choosing a restaurant, from fast food to the most formal dining experiences. No single option is right for everyone in every circumstance. They vary in cost and convenience and offering, but each fills an important niche of the market.
Similarly when it comes to investing, cost is, in fact, only one element of the decision when selecting and allocating to investments and constructing a portfolio, and is not the sole determinant of investor success. Other factors such as objective, performance, risk and investment management capabilities must be considered when selecting investments. This, combined with risk tolerance, time horizon, diversification and the client’s objectives, are all factors considered when constructing an appropriate investment portfolio. Advisors’ expertise plays a pivotal role in determining a portfolio that is suitable for a client and positioned for the investor’s ultimate success. The survey findings suggest this is something investors clearly understand and appreciate.
The latest IFIC/Pollara survey results confirm that advisors are highly valued by their clients, with the vast majority (84%) agreeing that “advice provided by my financial advisor is worth the fees”.
This result is all the more significant given investors’ increased awareness of the fees they pay. When asked about fees, 72% of investors reported they are confident they know the fees they pay for mutual funds and four-in-five investors (79%) indicated they know that part of the fee charged within mutual funds is used to compensate their financial advisor.
When it comes to paying fees, investors showed a clear – and growing – preference for paying fees indirectly (i.e. through their mutual fund fees) this year, with 59% preferring this method compared to 53% last year, and 33% preferring to pay fees directly.
Taken together, these results clearly demonstrate that investors recognize the value of advice, are willing to pay for it, and appreciate choice regarding compensation models including embedded and non-embedded options.
The regulatory response
AGF has always been an advocate for sound regulatory change that is grounded in the needs and preferences of all investors. Investors have made their voices heard. They overwhelmingly reported a high level of satisfaction with their advisors, a clear appreciation for the value of financial advice – which is informed by increasing awareness and understanding of fees – and a desire for flexibility to choose the right compensation model for them.
The IFIC/Pollara survey results demonstrate the positive impact of recently introduced regulatory enhancements such as CRM2. It is important that Canada’s securities regulators take heed of these important findings and let existing, seemingly effective regulatory initiatives play out before moving forward with additional measures. Such actions could, at minimum, restrict investors’ access to their preferred advice model but also could result in delayed or eliminated access to advice for many Canadians.
The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.
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