Investors’ confidence in mutual funds is at an all-time high, even as they’re becoming more aware of disclosure requirements and more discerning of the fees they pay for holding these products, according to the 2018 edition of the Canadian Mutual Fund Investor Survey, conducted by Pollara Strategic Insights on behalf of the Investment Funds Institute of Canada (IFIC).
This year’s edition of the survey found that 89% of investors believe mutual funds will help them reach their financial goals. That’s the highest percentage in the 13-year history of the survey, up from 85% in 2017 and from the all-time low of 74% in 2009 following the global financial crisis. In contrast, only 33% of these investors have confidence that ETFs will help them meet their financial goals, down from 37% last year.
“It’s notable that investor confidence [in mutual funds] is reaching such heights while we are also finding that mutual fund investors are significantly more aware of [the second phase of the client relationship model (CRM2)],” said Craig Worden, president of Pollara, in a statement.
Specifically, 65% of the 1,000 mutual fund investors surveyed, from June 11 through July 6, said they are aware of the changes requiring the inclusion of more cost and performance disclosure in their mutual fund statements. That’s up significantly from 41% last year, when the disclosure requirements came into effect.
But while Canadian investors are more aware of these changes, the percentage of investors who said the information in their mutual fund statements is easy to understand dropped to 72% this year from 82% in 2017. Similarly, the percentage of investors who said that their mutual fund statements provide them with all the information they need dropped to 74% from 82%.
Although there was a slight improvement from last year among investors who said these statements “clearly show the fees I pay to my advisor’s firm or dealer firm,” this metric remains low overall — at 53% vs 50%.
“While many of these results were encouraging, some important ones remained low, and some are moving in the wrong direction,” said Paul Bourque, president of IFIC, at the organization’s annual leadership conference in Toronto on Thursday.
“These results underscore how important it is for us to continue to focus our energies on improving disclosure effectiveness,” Bourque stated separately in a news release.
Still, investors’ confidence in the knowledge they have regarding the fees they pay on their mutual funds remains solid, at 72%. Although this metric is up from 66% last year, it’s in line with the average for the other years in this decade. As well, 59% of investors with financial advisors prefer that their advisor is paid through mutual funds fees, which is up from 53% last year.
Another notable finding of this year’s survey is that investors said they’re having fewer general conversations about fees and commissions, at 58% this year vs 64% in 2017. In contrast, specific conversations about the fees paid to advisors’ firms, and management expense ratios, have increased since the introduction of CRM2. In fact, 58% of investors said they discussed the fees paid to advisors’ firms this year, up from 52% last year. In addition, 59% of investors said they discussed MERs with their advisors this year, up from 56% last year.
“It does seem to us that investors are becoming more discerning and more knowledgeable about the types of payments they make than in the past,” Worden said at the IFIC event. “Now, because of CRM2, they’re beginning to know and realize that there are very specific types of payments.”
The survey also found that 85% of investors who purchase mutual funds do so through an advisor. And 95% of those investors reported some level of satisfaction with the advice they receive from their advisor, while 84% said the advice provided by their advisor is worth the fees. Still, only 37% of those who said their advisors are worth the fees said they “strongly agree” with the statement, while 47% said they “somewhat agree.”
The reason? More than three-quarters (78%) of investors surveyed reported that they have better saving and investment habits because of their advisors. In fact, 76% have used at least one of the three advisor services — investment planning, financial planning and retirement planning — during the past year.