Investors satisfied with mutual funds, more aware of fees: survey

A “vast majority” of respondents say their advisor “is worth their fees and encourages them to have better savings and investing habits,” says IFIC’s 2018 Canadian Mutual Fund Investor Survey.

Clients also said advisors have a strong likelihood of discussing investment suitability in relation to their financial goals.

Clients’ satisfaction with financial professionals is high (95%), the survey says. That’s an improvement over 2017, when there was “a slight softening of those who report[ed] being completely satisfied.”

When it comes to fees and compensation, clients are having fewer general discussions, with that number dropping from 64% to 58%. This is the first drop since 2015, the study says.

However, discussions about fees paid to an advisor’s firm and MERs have increased steadily since 2015, the survey says.

“Investor confidence in their knowledge of fees being paid has increased significantly this year,” the study says. In particular, the number of clients who believe they pay a direct fee to their advisor “remains low and has decreased since 2017.”

This year saw an increase in investors preferring to pay fees indirectly through mutual fund fees, with 59% preferring this method. Only 33% prefer to pay the fees directly.

Investors continue to receive statements and disclosure in paper format and are satisfied with the quality of the information, even while “the likelihood of [them] reading it right away continues to decline,” the survey says.

Still, people are more aware of advisors’ information requirements, and “there has been a slight increase in those who would consider investing on their own or using online tools.”

Most mutual fund investors (85%) buy funds through their advisors, with only some (13%) purchasing them online or through customer service reps, they survey says.

That’s unchanged from 2017 in both cases, but is a dip from 2016 when slightly more people (90%) bought from advisors and fewer (9%) used alternatives.

In 2018, nearly half of the 1,000 mutual fund holders surveyed (44%) reported buying a fund in the last 12 months, up from 39% in 2017. Sixteen percent had made a purchase in the last two years, and 15% had bought funds in the last two to five years.

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Mutual funds favoured over other securities

Mutual funds were favoured by the investors surveyed when compared with other investment vehicles such as stocks, GICs, bonds and ETFs.

A main reason is 89% were confident in the funds helping them meet their financial goals, compared with 85% of mutual fund holders surveyed in 2017. Broken down for 2018, 5% were completely confident, 56% were confident and 28% were somewhat confident.

GICs and other term deposits were the next investment of choice, with 66% of those surveyed feeling confident versus 59% last year. Investors were also more confident in bonds (51%), the survey says, up from 43%.

In contrast, investors were less excited about stocks and ETFs than in 2017 (65% to 61%, and 37% to 33%, respectively). They were also less reliant on their homes as an investment, with 76% expressing confidence this year versus 80% last year, the survey says.

“Confidence in mutual funds escalated quickly at the beginning of the decade (2009–2011) and has been on an upward trend since 2012,” the report says. “This year, confidence has hit an all-time high.”

The IFIC survey, in its 13th year, examines investors’ confidence in whether mutual funds can help them meet their goals as well as how they’re buying them, and their impressions of fees and related investment statements.

Read the full IFIC report.

About the study: One thousand telephone interviews were conducted with mutual fund holders 18 years of age or older across Canada, between June 11 and July 6, 2018. Those surveyed make all or some of the decisions regarding mutual fund purchases in their household.