Increased disclosure is paying off, indicates new study
Investor awareness of fees and investment returns appears to be improving in the wake of new disclosure rules, according to a survey of mutual fund investors conducted annually by Pollara for The Investment Funds Institute of Canada (IFIC).
The 2017 survey, Canadian Mutual Fund Investors’ Perceptions of Mutual Funds and the Mutual Funds Industry, found “increased investor knowledge of fees, increases in investor recall of advisor-initiated discussion of fees and compensation, and positive assessments of the way performance information is provided in the new statements.”
“We know that the process of changing behaviours takes time, said Paul C. Bourque, president and CEO, IFIC in a Nov. 22 statement. “Whether because of CRM2 or other factors, Pollara’s findings are encouraging in that they show steady increases in several measures that point to higher levels of investor knowledge and engagement. These increases are consistent with improvements that the BC Securities Commission identified in their research.”
The 2017 Pollara survey found that investor awareness of the fees they pay going to their dealer and advisor has gone up significantly over the past three years. Among those who purchased a mutual fund through an advisor in the past year, awareness jumped from 72 per cent in 2015 to 85 per cent in 2017, while awareness by all mutual fund investors rose from 69 per cent in 2015 to 78 per cent in 2017.
Meanwhile, client recall of advisors initiating conversations about fees and commissions is also on the rise. It has jumped from 58 per cent in 2015 to 70 per cent in 2017 for those investors who purchased a mutual fund from an advisor in the past year. “While surveys can’t identify the cause of changes in advisor behaviour, the Pollara findings indicate that advisors are spending more time making clients aware of the fees that they pay. Higher levels of advisor and investor engagement are key to improving overall investor protection,” said Bourque.
Pollara also asked mutual fund investors about their awareness of and interest in using online and robo-advice services. Only one in five respondents was aware of these services. Just four per cent of respondents said they were likely to use the service. “The industry, governments and regulators are putting considerable thought into how digital tools can improve the investor experience. The Pollara results tell us that stakeholders have considerable work ahead of them to educate and inform investors about digital investing,” said Bourque.