Canadian regulators' four-year study reveals growing confidence and fee awareness, decline in satisfaction with advisors
After a four-year wait, stakeholders in the Canadian investment industry can now see how investors’ knowledge, attitudes, and behaviour have changed since stricter investment-fund information requirements were introduced under CRM2 and Point of Sale amendments.
Representing the culmination of a multi-wave study of investors, a new report from the Canadian Securities Administrators (CSA) has found that since 2016, both the percentage of investors with self-reported knowledge how much they pay in fees and the percentage of those who were aware they paid fees have risen since 2016.
Canadians’ general appreciation of fee impact appeared to increase as well. Aside from a greater proportion of investors who place importance in monitoring the amount of fees charged, survey participants self-reported having a better understanding of fees on investment returns in 2019 compared to 2016.
Fee savvy has also improved as investors’ familiarity with different types of fees has generally gone up since 2016, though it appears there’s still much work to do. In 2019, 42% of respondents who reported seeing any reference to indirect fees on their annual statements, compared to just 29% who said the same in 2016. In addition, readership of statements were reportedly unchanged since 2016.
Focusing on investors’ understanding of performance, the report said that the percentage of investors who prioritized monitoring overall investment returns, investment performance relative to financial goals, and how their investments’ returns compare with similar types of investments all rose between 2016 and 2019.
Investors appeared to grow more confident in monitoring how their investments’ value changed over time, as well as assessing whether their investments are on pace to reach their financial goals. However, the proportion of investors reporting a good understanding of the return on their investments stood at nearly nine tenths in 2019, which didn’t represent an increase from 2016.
Turning to the value of advice, the report found a decline in how satisfied investors were with their relationship with their advisors. A greater percentage of investors said they’re inclined to change firms in 2019 compared to those who said so in 2016, though both numbers were lower than what the CSA observed in 2018.
“There was no increase in the percentage of investors who reported being more likely to change their fee arrangements,” the CSA said.
The number of investors who said they’d had discussions with their advisors in the past 12 months about fees associated with their investment rose from 2016 to 2019. But with respect to discussions on how fees impact returns, the surveys showed no improvement at the national level.
Discouragingly, the report found that advisors’ investment planning discussions had not improved in numerous areas. After registering an increase in 2018, the proportion of investors who reported having a written investment plan decreased in 2019, relapsing to 2016 levels.
Investors’ responses also indicated that advisors’ discussions of financial goals and progress toward those goals, different strategies to achieve those goals, or risk tolerance did not increase between 2016 and 2019. The percentage of investors who said they received statements about performance of costs and investments, the CSA said, did not show any statistically significant improvement over that time.
“We found, in 2019, that nearly all (95%) of investors reported having their advisor help develop an investment plan, and 84% of investors reported reviewing that plan with their advisor in the last 12 months,” the CSA said, adding: “These levels had not changed from 2016.”
