Awareness of fees and investment returns among investors appears to be increasing markedly, according to an annual survey of mutual fund investors that Pollara Inc conducted on behalf of the Investment Funds Institute of Canada (IFIC).
This year's edition of the survey, the first since new regulatory requirements have come into place as part of the second phase of the client relationship model (CRM2) requiring dealer firms to provide personalized cost and performance reporting on client account statement, found increased investor knowledge of fees as well as better recall of financial advisor-initiated discussions on fees and compensation. The survey also found investors taking a positive view of how performance information is being provided in their new account statements.
"We know that the process of changing behaviour takes time," says Paul Bourque, IFIC's president and CEO, in a statement. "Whether because of CRM2 or other factors, Pollara's findings are encouraging in that they show steady increases in several measures that point to higher levels of investor knowledge and engagement."
Investor awareness of fees has risen considerably in the past three years, the survey found. Among those who purchased a mutual fund through an advisor during the past year, awareness jumped to 85% in 2017 from 72% in 2015, while awareness among all mutual fund investors rose to 78% in 2017 from 69% in 2015.
Clients are also experiencing improving recall of advisors initiating conversations about fees and commissions. Among investors who purchased a mutual fund in the past year, recollection of these discussions jumped to 70% from 58% in 2015.
"Although surveys can't identify the cause of changes in advisor behaviour," Bourque says, "the Pollara findings indicate that advisors are spending more time making clients aware of the fees that they pay."
Awareness among investors that the fees they pay helps compensate their advisor has risen to 78% from 72% in 2016 and 69% in 2015, the poll found. A further 18% of survey participants reported paying their advisor directly for financial advice.
Investors' preference for paying fees directly to advisors or indirectly through mutual fund fees remains split, with a slight majority (53%) saying they prefer to pay indirectly for their advisor's services. Almost all survey participants said their advisors are providing value, with 70% saying this value is good or excellent.
Clients' satisfaction with their advisor remains sky high, at 94%, which is on par with previous years, with the majority believing their advisor helps them achieve better returns and improves their savings habits.
The survey also found Canadians continue to have more confidence in mutual funds than in other investment vehicles such as stocks, guaranteed investment certificates (GICs), bonds and ETF.
Still, although confidence in mutual funds remains high and steady, the level of confidence in stocks and ETFs has been rising from a much smaller base while confidence in GICs and bonds is declining. In fact, among clients, confidence in mutual funds is actually higher than confidence in the primary residence as an investment.
Mutual fund purchases remain consistent, with 40% of survey participants making a purchase in the past year and 60% in the past two years. The vast majority of purchases (85%) continue to be transacted through advisors, although this is down slightly from 2016; in contrast, the incidence of mutual fund purchases through customer service reps or online facilities has risen to 13% from 9%.
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