Canadians favour mutual funds investments

More telling is the finding that Canadians’ confidence in mutual funds was only slightly lower than their confidence in their homes. The poll found that 82% of Canadian mutual fund investors believe their primary residences will help them meet their financial goals. In contrast, confidence in exchange-traded funds (ETFs) is at a much lower 33% – although this figure represents an all-time high for this newer and rapidly expanding investment vehicle.

“When it comes to saving for retirement and building wealth, investors have a high level of confidence in mutual funds,” says Jan Dymond, IFIC’s director of public affairs. “There’s no question there’s growing interest in ETFs, but mutual funds are holding strong.”

Confidence in mutual funds has improved by seven percentage points since 2009, when confidence stood at 74%; confidence in ETFs has improved by five percentage points from 28% in 2009, the first year that ETFs were included in the survey. (This year’s survey was the eighth annual edition.)

Although confidence has also increased for stocks since 2009, it has dropped for GICs and bonds. These income-paying investments have also seen their interest rates decline during the same period.

Says the survey report: “Mutual funds and primary residences are seen as similarly strong in terms of how confident Canadian investors are in them as products to meet their financial goals. The gap between them continues to represent a statistical tie.”

The 82% of Canadians surveyed who expressed confidence in their primary residences is slightly higher than the 81% who did so in 2009. Residents of Ontario and British Columbia were more confident than other Canadians in the ability of their homes to help them meet their financial goals.

The percentage of mutual fund investors who also own their home was relatively high at 89%. By comparison, 54% of fund investors also own GICs, 51% own stocks, 37% own bonds and 16% own ETFs.

Confidence in the various investment options available varies by gender. For mutual funds, 52% of men and 49% of women said they are “very confident or confident”; for stocks, 35% of men and 31% of women expressed the same confidence; for GICs and term deposits, it was 34% of men and 44% of women; for bonds, it was 29% of men and 32% of women; and for ETFs, it was 17% of men and 11% of women.

There were some other demographic differences that also came to light:

– Urban investors showed more confidence than rural investors in bonds, stocks, GICs and ETFs.

– University graduates were more confident in bonds, stocks and ETFs. Those with a high-school or less education were more confident in GICs.

– Investors with $100,000 or more in investible assets expressed greater confidence in ETFs than survey participants with lower incomes.

On the subject of fees, 69% of mutual fund investors believed part of the fees charged on their funds goes toward compensating their financial advisors. About 14% said they pay a fee directly to their advisor or their advisor’s firm. The likelihood of paying a direct fee rises with the value of assets.

Slightly more than half of survey participants said they would prefer to compensate their advisors through mutual fund fees, while 41% said they would prefer to pay a direct fee to their advisor. However, if the direct fee resulted in higher costs, just 16% of participants would be likely to continue using their advisor, 33% would be somewhat likely and 47% would be unlikely to continue.

“The split says to us that it’s important to retain choice,” Dymond says. “There is some interest in paying advisors directly for their services, but that is tempered by whether or not it would lead to higher fees. There’s a lot of question about whether clients would continue with their advisors if fees were higher. And this is relevant, as we know that professional financial advice has tremendous benefits and affects wealth accumulation in a significant way.”

The survey report was based on interviews with 1,004 mutual fund investors, aged 18 or older, who make all or some of the decisions regarding mutual fund purchases in their households.

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