Confidence in mutual funds remains high: survey

The Pollara survey asked mutual fund owners to rank their confidence in the ability of various financial products to help them achieve their financial goals.

“Again this year, Canadian mutual fund investors have expressed higher confidence in the ability of mutual funds to achieve their financial goals than in other products tested,” said IFIC president and CEO, Joanne De Laurentiis.

“Confidence in mutual funds has continued to improve steadily since 2009, and is now again in line with the confidence levels of 2006.”

In the 2014 survey, mutual funds achieved an 85% confidence level compared with 65% for stocks, 64% for GICs, 55% for bonds, and 34% for ETFs.

Confidence in advisors also remains high with 98% of those surveyed agreeing that they trust their advisors to give them sound advice and 92% that they obtain better returns than they would if investing on their own.

For the second year, respondents were asked their views on different options when it comes to paying for advice. The survey found 54% support the prevalent Canadian model of paying through embedded fees, while 38% would prefer a direct payment to the advisor. This represents a slight shift since last year towards a preference for embedded fees. However, when asked about the likelihood of staying with their advisor if direct payment resulted in a higher cost to the investor, only 18% indicated they would be very likely or certain to continue.

“Studies by CIRANO and the Conference Board of Canada have demonstrated the positive impact of financial advice on investor savings, and on Canada’s long-term economic well-being. Any policy discussion that has the potential to limit payment options needs to take these findings about investor preferences into account,” said De Laurentiis.

New this year, were questions on how investors rate their advisor’s understanding of their risk tolerance. Nearly all (95%) mutual fund investors say that they discussed their comfort level with investment risk with their advisor and agreed that they were satisfied with their advisor’s original and ongoing understanding of their risk tolerance.

“Investor satisfaction with advisors’ understanding of their appetite for risk is also reflected in investors’ consistently high levels of satisfaction with the advice they receive, said De Laurentiis. “This number has steadily increased since 2009 and may be the result of the ever increasing focus on disclosure.”

“Investor confidence and satisfaction are complex concepts that can be impacted by markets, by returns, and by regulators,” said De Laurentiis. “But most of all, they are driven by the quality of clients’ relationships with their advisors and the savings they are able to build. That is why the industry is eager to successfully introduce the new disclosure regime known as CRM2. We believe that the new rules will further enhance advisor/client conversations and support investor confidence.”