Mackenzie tops investor statement survey

Investor statements are getting clearer, they look better and they provide more relevant information, but they still have room to improve according to research firm Dalbar’s 2006 Mutual Fund Investor Statement Analysis.

Since the firm’s last survey two years ago, the industry has made several improvements to their investor statements, says Mark McDonald, Dalbar’s manager of client relations. The most notable improvement has been in the way mutual fund companies report capital gains.

“Two years ago there may have been a handful of companies that would tell [investors] what they would have disposed of over the year, what there adjusted cost base was and what they have to tell the CRA [Canada Revenue Agency] about,” McDonald says. According to the latest study, 16 of the 22 companies surveyed now include that information.

Better still, these companies are presenting the information in the same order as demanded by Schedule 3 of the tax forms. “It just makes for easy transposition from the capital gains summary on to one’s tax return.”

Other improvements that Dalbar noticed in its study included better reporting of how assets were allocated inside the fund and an elimination of erroneous messages, like RRSP marketing material included with a non-registered account statement. “Companies are doing better at data mining and determining what messages are not going to make sense,” McDonald says.

The study of 22 of Canada’s largest mutual fund companies ranked Mackenzie Investments as preparing the best statement with a score of 78.84 out of 100. Mackenzie also came in on top in Dalbar’s last study two years ago, albeit with a slightly higher score of 79.25. (The drop can be traced back to Dalbar’s decision to place higher weightings on areas such as fee disclosure and percentage rates return).

AGF Funds and Dynamic Mutual Funds placed second and third, with scores of 75.55 and 75.30, respectively. All of these companies produce clear easy to read statements that have excellent reporting of capital gains, says McDonald. They also produce graphs showing investors their account balance and how the assets are allocated.

Mackenzie, which is obviously pleased with its score, uses studies like this one to enhance its investor statement. “Industry research like the Dalbar study along with the direct feedback from our investors and advisors really helps us analyze investor needs and make improvements,” says Liana George, Mackenzie’s vice-president of marketing and investor relations. “With us, statement enhancement is an ongoing process.”

Mackenzie redesigned its statement two years ago following feedback from investors and advisors who said the company should focus the front page of the statement to show a snapshot of how the account has performed, not just since the last statement, but since the account was opened. “Investors were always telling us, ‘Tell me what I’ve put into this account and what it is worth today.'”

The lowest score in the Dalbar survey was 55.19. Although McDonald’s was unwilling to identifying that firm, he said companies that fared poorly forced the investor to look for information in their statement and did not define abbreviations in a glossary.

The scores of banks and independents were spread evenly in the study, he adds. More independent companies tended to earn better scores, while the laggards were generally smaller companies.

Where most companies fell short was on providing a rate of return, not only in terms of how funds performed on percentage basis, but also compared to that fund’s relative benchmark, McDonald says. “Those are two things that we would really like to see on statements,” he says. The benchmark comparison doesn’t appear on any statement in Canada, while the rate of return is on about one third of statements Dalbar looked at. “That is something that even the leaders can improve upon.”

Statements could also be improved by providing investors with a projection of how their fund might look in 10 or 15 years based on current growth and contribution rates. These same companies have also been slow to tell investors how they can access information on their holdings online.

In terms of providing benchmark comparisons, George says that while they have the capacity to show that information, some investors want it and some don’t. “The majority of investors and advisors have told us they want a simple and clear summary.” She adds that extra information is given on the investor statements delivered to its mid-tier and high-net worth clients. “At this point that’s where this information is shown,” she says. “It’s not shown on the general account statement just yet, but it’s a work in process.”

Filed by Mark Brown, Advisor.ca, mark.brown@advisor.rogers.com

(05/17/06)