Investors confident with funds: poll

Contrary to some recent press reports, the investing public is largely satisfied with the mutual fund industry, and is even comfortable with the level of fees associated with funds, according to a Pollara survey commissioned by IFIC.

The nationwide survey found that 84% of mutual fund investors were at least “somewhat comfortable” with fees, while only 12% expressed some level of discomfort with the costs. Similarly, 82% were comfortable with their understanding of the fees they paid, while 14% were not comfortable.

“Management fees and advisor fees are near the bottom of the list of investors’ considerations out of ten issues we tested,” said Angela Marzolini, vice-chair of Pollara. “These issues ranked eighth and ninth out of the ten issues tested.”

At the top of that list was the advisor’s opinion of the fund under consideration, followed by the risks associated with it and the past performance.

The results are sure to stoke debate. There have been repeated criticisms in the national media that Canadians pay among the highest mutual fund fees in the world. While that point is being debated, the Pollara survey indicates that it’s not a concern for most fund investors.

In fact, for most respondents, mutual funds were second only to the roof over their heads in terms of investor confidence. The survey found 85% of respondents were confident that investing in mutual funds would help them meet their financial goals; rock-solid GICs were third, with 71% expressing confidence.

Investors cited a wide range of factors for why they decided to invest in mutual funds. Professional management and easy diversification were cited by 89%. The ability to invest with small amounts of capital and the perceived strength of regulation were also widely appreciated.

The survey also found that Canadians are embracing the advisor as a distribution option, with 85% of respondents making their investment through someone who provided guidance. Only 11% said they made their fund purchase online or through someone who simply took their order.

“Using an advisor is a matter of course for investors,” Marzolini said. “Advisors are by far the most consulted source of information when investing in mutual funds.”

Among those working with an advisor, 85% of survey respondents expressed satisfaction with the advice they received.

When it comes to the advisor meetings, 94% of respondents recalled discussing the risks associated with their investment, as well as discussing their overall investment objectives, and 77% recalled completing a risk assessment questionnaire.

“Our respondents report that their advisors have been diligent in discussing with them the amount of investment risk they are comfortable with,” says Marzolini. “Advisors are equally diligent in their discussion of the client’s overall investment objectives and goals.”

As far as compensation goes, however, many investors remain in the dark. Just 55% said their advisor had discussed how they are compensated, while 42% said their advisor had not disclosed this information. A quarter of respondents also said they had not been told whether there were any load fees associated with the fund they were buying.

“It’s important to remember, however, that the average investor has been making decisions about mutual fund investing for almost 14.5 years,” Marzolini points out. “In other words, it’s possible that these discussions have taken place at some point in the past, but that they are not remembered.”

There is more room for improvement in terms of investor education as well. While 83% said they were at least “somewhat comfortable” with their understanding of the funds they own, there were still 14% who were not comfortable with their understanding.

The survey involved nearly 1,900 mutual fund investors from across the country and is considered accurate to within 2.2%, 19 times out of 20.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

(09/29/06)

Steven Lamb