The Investment Funds Institute of Canada’s second annual mutual fund investor survey has reinforced the fact that investors rely upon and are satisfied with their financial advisors and mutual fund products.
This year, the national poll, conducted by POLLARA, shows some 83% of the 2,500 mutual fund investors surveyed make their mutual fund purchase through an advisor rather than from someone who does not provide advice — such as an online provider or from someone who simply took their orders (14%). Of the investors who use advisors, six out of 10 report that their advisors are involved, at some level, with their final decisions about purchasing a mutual fund.
The survey also points to investor confidence in the mutual fund product itself. A total of 83% of mutual fund unitholders say they are confident that mutual funds (along with their principal residence), more than any other investment, will meet their future financial needs. This is greater than stocks, bonds, GICs and real estate investments other than the principal residence.
Canadian investors are not alone in their preference for advisors. The Investment Company Institute in the U.S. recently conducted a survey of mutual fund unitholders that indicates investors most often turn to professional advisors for information before buying a fund.
The ICI survey indicates three-quarters of U.S. investors who hold mutual fund units outside their work retirement plans purchased them through professional financial advisors — full-service brokers, independent financial planners, bank representatives and insurance representatives — who provide investment advice and are compensated by the investor for their services. Investors also looked to a fund company or its Web site, friends and family, a mutual fund prospectus, shareholder reports and mutual fund rating services — but not to the same extent as they use advisors.
Investors’ reliance on and preference for advisors is good news for advisors. But the IFIC survey provides information on several areas in which advisors can improve on the services they provide. Some 69% of investors say they are satisfied at some level with the advisor’s original assessment and ongoing understanding of their risk tolerance. But that means 31% of investors are not satisfied.
As well, only 54% say their advi-sors discussed fees or compensation with them when they last bought a fund, and 63% say their advisors discussed sales commissions. It’s true that the “advisor” could have been a bank employee who gets a salary, not a commission, and this is something IFIC will delve into further in the future. But the survey results still indicate room for improvement.
Canadians have become far more knowledgeable investors and are looking increasingly to build their financial wealth. This is borne out by Investor Economics Inc. data that show that financial wealth makes up slightly more than 30% of the total wealth of Canadians. At the top of the list of what comprises financial wealth are investment funds and fund wraps, collectively 32% of the financial wealth — more than direct equity, fixed-income and money market ownership.
The confidence the financial services industry has built up over the years now needs to be maintained — by coming up with new products to meet the changing needs of investors, taking an active voice on behalf of investors in regulatory initiatives and ensuring that the trust built between investors and advi-sors is secured.
For most investors, the first — and only — view of the industry they get is from their financial advisors. The confidence most investors have in their advisors must be upheld. IE
Joanne De Laurentiis is president and CEO of the Investment Funds Institute of Canada.