Clients say experience guides choice of advisor

Investors rely on the insight provided by their financial advisors, but may not see them as the sole or even best source of investment information, according to a survey of 1,000 Canadians who currently use a financial advisor.

The survey served as the basis of a report to the Joint Standing Committee on Retail Investor Issues: Retail Investor Information Survey.

Experience appears to be the single most important factor when clients choose an advisor, cited by 71% of respondents who were asked for their three most important determining factors. Referrals, and being registered with the provincial securities regulator, were each listed by 49% of respondents. Credentials were in the top three for 42%, while education/training was mentioned by 36% of clients.

A full 40% said they only used their advisor sometimes or occasionally, when making investment decisions. Only 34% said they used their advisor every time.

Nearly all (91%) said their advisor’s opinion ranked as one of the top three sources of information guiding their investment decisions; which begs the question of why the remaining 9% continued to use their advisors at all.

Family and friends were named as important information sources by 65% of respondents, but after that there was a significant fall-off. Newspapers ranked third but were listed by only 33%, while 31% mentioned annual reports and financial advice websites. Just 26% of clients said they placed the prospectus in their top-three list of sources.

Affinity for these sources was dependent on the clients’ perception of their own levels of knowledge. Those who self-identified as very knowledgeable were less likely to rely on family and friends (58%) than those with lower levels of knowledge (77%).

And, those with more confidence were more likely to consult prospectuses and financial websites than those who said they had lower levels of knowledge.

The majority of clients (59%) said they had no more than a basic understanding of what they had bought, with 12% saying they had no understanding at all, because “that’s my advisor’s job.”

A full 78% said they relied on their advisor’s understanding of the investments they bought.

In what appears to be support for the proposed point-of-sale document, 74% of investors said they want to receive information from their advisor prior to making a purchase decision. Among this group, 78% said that they would postpone a decision until such information was available.

And, in a small vote for “access equals delivery,” 21% said they were content to simply know where they could find the information if they needed it.

While they said they wanted information about their investments before purchase, the survey found 35% did not review the information their advisor provided for them, and another 26% spent less than 15 minutes reviewing it.

(07/07/09)