Although investors are becoming increasingly reliant on their financial advisors to guide them through the investing process, clients also want more from these relationships, according to new research released on Thursday.
The Canadian Securities Administrators’ (CSA) 2016 edition of its investor education survey found that a growing number of Canadians are relying on advisors, with 56% reporting that they utilize an advisor, up from 43% in 2006 when the CSA first carried out the survey.
Moreover, investors cited advisors as their primary source of investing information and credited their advisors as the reason for reassessing their risk tolerance in the past year. The CSA survey found that 61% reviewed their level of risk tolerance during the year, up from 49% in 2012.
“With more Canadians relying on investment advisors, it’s critical that advisors regularly review information with their clients, including risk tolerance, to be certain that their clients’ investments make sense for their current situation and future goals,” says Louis Morisset, chairman of the CSA and president and CEO of the Autorité des marchés financiers, in a statement.
In addition, a survey from France-based Natixis Global Asset Management has also found that advice is the most important factor driving Canadian investors’ financial decisions, as 43% cited advice vs 21% who credited online research. The Natixis survey also found that investors generally value that advice, with 63% saying that those with advisors are more likely to reach their financial goals and 62% saying that advice is worth the cost.
However, the Natixis survey also noted that investors want more than mere investment advice. It found that 41% of investors say they value “getting proactive advice … on what they should do next.”
“Investors value financial advice that helps them navigate today’s increasingly complex global markets,” says John Hailer, CEO of Natixis for the Americas and Asia, in a statement. “It’s imperative the financial [services sector] is relentless in our efforts to educate investors and help them meet their long-term financial goals.”
Indeed, the Natixis survey also found that investors are hungry for strategies to help them better manage risk and that there’s a strong interest in assets invested according to environmental, social or governance (ESG) criteria. Yet, less than half of investors with advisors (47%) have talked with their advisors about ESG investing, it notes.
“Canadians clearly want to look beyond traditional strategies to diversify their portfolios, manage risk and invest in companies they are proud to own,” says Abe Goenka, CEO of Natixis Global Asset Management Canada LP, in a statement. “However, it’s also clear they would benefit from professional advice and education to help them understand their options and make decisions that support their goals.”
Amid this increasing reliance on advisors, the CSA survey found that investor knowledge has not improved. Only six out of 10 respondents could pass a seven-question quiz measuring their investment knowledge, which is unchanged from 2012.
Furthermore, the CSA survey also found that 60% of investors still do not bother to check their advisor’s registration, even as most of them say they believe that checking registration is a worthwhile endeavour.
On a positive note, the CSA reports that the incidence of suspected investment fraud has declined, with 22% reporting that they have been approached with an investment they suspected was fraudulent, down from 27% in 2012. Yet, less than a third reported the incident.
The CSA survey was carried out by Innovative Research Group, which polled 4,298 Canadian adults online from Feb. 10-20. The Natixis survey was part of a larger global study of more than 7,100 investors in 21 countries. The Canadian component canvassed 300 individual investors with a minimum of $258,000 (US$200,000) in investable assets. It was also carried out online in February.
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