Next month’s numbers may well tell a different story, but February 2020 numbers reported by the Investment Funds Institute of Canada (IFIC) show that investors were still buying mutual funds and exchange-traded funds (ETFs) during the month of February.
In the final lead up to the Registered Retirement Savings Plan (RRSP) contribution deadline, mutual funds recorded net sales of $8.2-billion in February 2020. The majority of the assets were directed into balanced funds and bond funds, which posted gains of $3.5-billion and $2.9-billion respectively. Equity mutual funds lagged with only $318-million in net new sales.
Higher sales than last year
The overall influx - $8.2-billion – is notably higher than sales reported at the same time last year, when February 2019 sales reached only $4.1-billion
In total, the value of all mutual fund assets ultimately declined $51.2-billion to settle at $1.606-trillion. This is down slightly from the $1.657-trillion in total assets the industry reported in January 2020, but up from the $1.506-trillion reported in February 2019.
ETF assets, meanwhile, reached $210.3 billion at the end of February 2020, down slightly from the $211-billion reported in January 2020 but up from the $169-billion reported in February 2019.
ETFs outpace mutual fund sales
Slightly outpacing new mutual fund sales, new ETF sales reached $8.5-billion in February 2020. Unlike mutual funds, the bulk of new sales were directed towards equity ETFs. These recorded net new sales of $4.9-billion while balanced ETFs and bond ETFs attracted only $264-million and $2.8-billion, respectively. The total number of new ETF sales - $8.5-billion – is a significant jump compared to February 2019 numbers when total ETF sales reached only $1.3-billion.
Before the numbers came out, the Insurance Portal had the opportunity to speak with a few advisors to see how clients were feeling by the tail end of RRSP season. (Markets, at the time, had only declined eight per cent from February 20 to the RRSP deadline on March 2.)
They say the client reactions advisors will get during such times of stress will be closely tied to the type of business they’ve built over time – those who’ve built a business being a “shoot from the hip” stock jockey, “are going to get “a lot of weird calls,” says Jason Pereira, a Toronto, Ontario-based Certified Financial Planner (CFP) with Woodgate Financial Inc. He adds that taking the time to fully discuss what can go wrong in the markets, from the outset, makes client conversations a lot easier when times get rough. “We don’t spend time talking about returns or what we expect on the upside, we spend more time talking about what happens when things go wrong. If there’s any semblance of panic then we’re really not pointing to the right portfolio.”
Nervous clients
Pereira says he fielded just two calls from nervous clients during the last days before the RRSP deadline. “I had one nervous phone call and another client who wanted their contribution to cash. It was a minor sum compared to their total net worth. I actually had more calls from people looking to get into the market.”
Edmonton, Alberta-based CFP, Al Nagy, associate financial consultant with IG Wealth Management has a similar approach. He agrees that having properly managed client relationships – those built with care, over time – make downturn conversations easier.
“You establish a client base and you coach them through it. The fluctuations that clients see are normalized, even though what we’ve gone through is certainly abnormal,” he says. “Clients who were coming in at the last minute, making those last minute contributions were kind of excited to take advantage of the dip. I would suspect that it was a strong RRSP season.”
