Spooked, indecisive and probably a two-time loser.
That’s the unflattering portrait of the average Canadian investor emerging from recent research. Fortunately, investment advisors are in a unique position to recast that image and, with education and guidance, position their clients to win in 2010.
In January, Franklin Templeton Investments Corp. conducted its latest investor sentiment poll. The findings of pollster Angus Reid Public Opinion offer a sobering snapshot of the cautious and contradictory mind of the average Canadian investor at this time.
We have learned that few inves-tors took advantage of 2009’s stellar recovery in the equities markets. A whopping 87% of Canadians surveyed either sold, froze, employed different strategies or simply didn’t know what to do last year.
Only 13% were in a buying mood and made the most of surging markets around the world, including markets in Canada. The S&P/TSX composite index returned a heady 30.7% last year — the leading index’s best annual return since 1979. Sadly, many investors lost twice: first, when markets fell in 2008; then, a second time, when markets recovered in 2009.
Not surprising, very few Cana-dians have a sense of how the markets performed. Only 14% of those surveyed knew the S&P/TSX composite index was up by more than 20% in value in 2009. Fifty-eight per cent did not know the index’s returns; and, worse still, 10% thought the index actually lost value in 2009 while 6% thought it remained flat.
Despite the markets’ recovery and an improving Canadian economy, the survey found investor skepticism and fear on the rise. Forty per cent of respondents described their current investment personality as either “suspicious” or “timid,” up by 6% from February 2009. Meanwhile, 30% of investors described themselves as “analytical,” “opportunistic” and “risk-taking,” down by 3% from a year ago.
There’s a deep reluctance to get back in the markets any time soon. A slender 9% of survey respondents were thinking about stocks, while 16% were considering a more balanced approach, blending a mix of equities, fixed-income and balanced mutual funds. Fifty-eight per cent weren’t planning to make new investments in 2010 or simply don’t know what to do.
It’s a disconcerting picture. Investors are fearful and unable to act, yet are ignorant when it comes to the markets’ reversal of fortune and investing options. By and large, investors missed out on the major recovery of 2009, and their tentative state has them poised to lose again in 2010.
Here’s the good news: knowledge of the investment climate lends itself to action. Thirty-seven per cent of survey respondents who described themselves as buyers in 2009 correctly identified the markets’ recovery. Canadians who invested last year were far more likely to understand the markets’ performance.
Many of you have been having meaningful discussions with your clients this past year. Our survey found that 70% of investors expect to maintain the status quo in their advisor relationship or be more reliant on their advisor in 2010. Clearly, the majority of clients recognize the value of advice. It’s now up to you to get them off the sidelines and back into the game.
Education and knowledge, the stock-in-trade of financial advi-sors, is the most meaningful tool at your disposal.
The best investors are informed investors with a keen understanding of their portfolios, their tolerance for risk and long-term goals. An advisor who builds understanding and trust with clients will always win out in challenging markets. IE
Don Reed is president and CEO of Toronto-based Franklin Templeton Investments Corp.
Getting your clients off the sidelines
In the recession’s aftermath, many investors are fearful and demoralized
- By: Don Reed
- February 8, 2010 October 30, 2019
- 15:01