Mutual fund investor confidence rises

Canadian mutual fund investors continue to express strong confidence in the investment vehicle, according to an annual poll survey by the Investment Funds Institute of Canada. And for the first time since 2008, funds outrank even the primary residence in terms of confidence.

Eighty four percent of poll respondents expressed confidence in mutual funds, edging out the homestead (81%) and handily beating GICs (64%), equities (63%) and bonds (58%).

The perennial flaw with the study remains, however: the survey sample consists exclusively of mutual fund investors, and does not capture the opinions of those Canadians who do not invest in mutual funds.

The overwhelming motivation underlying the purchase of mutual funds is still saving for retirement (82%), while 17% cited some other reason.

When asked how they bought their funds, 81% of respondents said they employed the services of a financial advisor (down from 85% in 2010), while 17% made their investments independently. Somehow, 2% were not sure how they got into their funds.

It would appear that even some of those who did not buy funds through an advisor still consulted on, as 89% of investors said they discussed suitability with their advisor. Confidence in that advice was also high, as 82% said they were satisfied or very satisfied with the advice they received. One in five rated the advice as 10 out of 10.

“Canadian mutual fund investors appreciate the role that advisors play in supporting their long-term financial health,” said Joanne De Laurentiis, president and CEO of IFIC. “This relationship between investors and advisors enhances investors’ confidence in mutual funds as a means of meeting their financial goals.”

On average, mutual fund investors have been using the services of advisors for 18 years. Among those retired (ages 65 and over), the average is 23 years.

Turning to fees, 71% said they were at least somewhat confident in their knowledge of any fees they pay for their mutual funds. But only 54% recalled discussing compensation with their advisor the last time they bought a fund.

When asked about the bundling of compensation into the cost of the fund, versus splitting it out, 59% said they preferred embedded compensation, assuming that each approach would cost the same amount in the end. One third said they would prefer the transparency of unbundled advice costs.

Two thirds said they received services from their advisor beyond the purchasing of funds, such as budgeting or planning for future expenses.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.