On August 27, the Canadian Securities Administrators (CSA) published a report on their four-year study of what individual investors think about fees and the performance of their investments and how they interact with their advisors (Report). The study was conducted to measure the impact of Phase 2 of the Client Relationship Model (CRM2) and the mutual fund “point of sale” (POS) rules on investor knowledge, attitudes and behaviour, although the CSA acknowledges that other developments such as news coverage and growing interest in low-cost funds may have contributed to the changes identified in the Report. Key findings include the following:
Fees: Readership of account statements hasn’t changed much since 2016, but more investors reported having a better understanding of how fees affect investment returns and considered it important to monitor the fees they were charged. However, there was no improvement between 2016 and 2019 in the number of investors indicating that their advisors discussed the impact of fees on returns with them.
Clients (Dis)Satisfaction: There was a statistically significant decline between 2016 and 2019 in how satisfied investors were with their advisors. More investors reported that they had changed, or were likely to change, their advisor in 2019 as compared with 2016.
Fund Facts Are Just Fine: Very few investors reported that they want more information to be included in the Fund Facts document.
Let’s (Not) Talk about Investment Plans: Investors reported little change in representatives’ practices of discussing investment planning with them, comparing 2019 to 2016 levels.
Firms with a significant number of individual clients might find it worthwhile to skim the Tracking Study as well as the Report. The Tracking Study includes demographic data and more detailed breakdowns of the findings (e.g. by province and account type). For example, the Tracking Study shows that a statistically significant increase in the percentage of investors advised under the discretionary authority (PM model) recently changed, or were likely to change, their investment firm (13% in 2016, versus 24% in 2019).
The CSA said that it expects the study results to inform its policymaking, although it did not provide any specifics. If you want to discuss the Report’s relevance for your business operations, please do not hesitate to contact us.
August 31, 2020