Investors relying less on advisors for fund purchases: IFIC poll

Mutual fund and ETF investors are relying less on financial advisors for their purchases, according to the Investment Funds Institute of Canada’s annual investor survey. They’re also having fewer fee and suitability discussions with their advisors.

Roughly two-thirds (62%) of mutual fund investors made their last investment purchases through advisors, said the 2023 survey, which was released on Thursday. That’s down three percentage points since 2022 and eight percentage points since 2021.

Among ETF investors, only one-third (33%) made their last investment purchases through advisors, down one percentage point since 2022 and seven percentage points since 2021.

The majority of mutual fund investors have done some self-directed investing, the survey found, and 42% said they’ll likely make an investment purchase without an advisor in the next year. Among ETF investors, that figure was 65%.

Despite the continued decline in the use of advisors, mutual fund investors’ satisfaction with advisors was high (92%) and consistent with the previous two years.

A similar proportion of ETF investors were satisfied (91%), though that was down slightly from 92% in 2022 and 97% in 2021.

Investors satisfied with their advisors were more likely to have discussed all three fees mentioned in the survey (sales charges, management expense ratios, and fees paid to the firm).

However, fewer investors are having fee discussions with their advisors, the survey said.

For example, while most mutual fund investors purchasing from advisors reported that the advisors had discussed at least one aspect of fees (74%), this was down from 86% the prior year. Results were also down among ETF investors.

Also, the likelihood of discussing suitability decreased after a significant increase in 2022 — the year the client-focused reforms, with their enhanced suitability requirements, were implemented.

Respondents were asked if, the last time they invested, their advisors discussed how well-suited a fund was for reaching their investment objectives.

The 2023 survey found that 78% of mutual fund investors said their advisors had done so, compared to 80% in 2022 — though up from 64% in 2021.

Among ETF investors, 69% reported having the suitability discussion, down from 74% in 2022 and up from 66% in 2021.

Another finding was that about half of both investor types believed their current annual fee and performance statements showed all the fees they pay for their investments — a situation that total cost reporting aims to address once implemented.

Among the survey’s other findings was a rebound in confidence in investments across the board, after a decline in 2022. The greatest increases in confidence among both types of investors were for GICs and bonds.

The survey was conducted by Pollara Strategic Insights in June 2023 with 4,121 mutual fund investors and 1,514 ETF investors.