Re: Investors more confident in mutual funds, discerning of fees, by Pablo Fuchs, investmentexecutive.com, Sept. 27, 2018
The 2018 Canadian Mutual Fund Investor Survey, conducted by Pollara Strategic Insights on behalf of the Investment Funds Institute of Canada (IFIC), has given Canadian investors a voice — and regulators another opportunity to hear directly from investors —
during a time of significant debate and consultation in the investment industry.
Overall, the findings of IFIC’s survey are not surprising. The results echo what we have been seeing in other industry surveys and reinforce what we’re hearing from our own clients.
Specifically, 85% of investors surveyed said that they “would not want to handle my investment on my own.”
Given the trust investors place in their financial advisors, we at AGF were pleased — but not surprised — to see that satisfaction with advisors is very high (95%), which is consistent with most previous years, and that an overwhelming majority of investors (78%) reported they’re either “completely satisfied” or “satisfied” with the advice they receive.
AGF has always been a strong advocate for the value of financial advice, and these findings support previous research demonstrating that 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 investors surveyed for IFIC’s study reported having better savings and investment habits because of their advisors.
The client-focused reforms that the Canadian Securities Administrators have proposed must ensure that investors — especially those who are only beginning their path toward their long-term financial goals — are not displaced or delayed access to financial advice.
The notion that smaller investors can be served through other means — namely online tools such as robo-advisors or self-directed platforms — until such a time that their wealth justifies or meets an advisor’s minimum requirements is misplaced.
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 appears the value of advice is being lost as a key driving investment principle.
Cost is not the sole determinant of investor success in selecting and allocating investments and constructing a portfolio. Other factors such as objective, performance, risk and investment-management capabilities must be considered when selecting investments. And these factors — combined with risk tolerance, time horizon, diversification and the client’s objectives — all are taken into account when constructing an appropriate investment portfolio for clients.
Advisors’ expertise plays a pivotal role in building a portfolio that’s suitable for a client and positioned for the investor’s ultimate success. The survey findings suggest this is something investors understand clearly — and appreciate.
In fact, when paying for advice, investors showed a clear — and growing — preference for paying fees indirectly (i.e. through their mutual fund fees) this year. Notably, 59% of investors surveyed prefer this method, up from 53% last year, while only 33% said they preferred to pay fees directly.
These results demonstrate that investors recognize the value of advice, are willing to pay for it, and appreciate having a choice in the way they pay their fees, which includes embedded and non-embedded options.
At AGF, we believe in sound regulatory change that’s grounded in the needs and preferences of all investors. Investors have made their voices heard in IFIC’s latest annual study. They overwhelmingly reported a high level of satisfaction with their advisors, a clear appreciation for the value of financial advice that’s informed by increasing awareness and understanding of fees, and a desire for flexibility to choose the compensation model that works best for them.
Regulators have asked for input on compensation structures. Clients have spoken: they are prepared to pay for advice and want options. This is the best outcome, consistent with a trusting and transparent client/advisor relationship, and ensures no Canadian will be underserved by a lack of advice.
Blake Goldring is chairman and CEO of AGF Management Ltd.