Survey from the Gandalf Group also indicates no demand for change in the method of compensation and the potential for an “advice gap”
TORONTO, May 30, 2017 (GLOBE NEWSWIRE) — A new survey conducted recently by the Gandalf Group and commissioned by AGF (TSX:AGF.B) shows that Canadian investors are satisfied with the current system of financial advice in Canada and the way advisor compensation is calculated. The survey was designed to probe into issues relating to individual investors, the advisory services industry, fund providers and regulators, including: satisfaction with advice, fees, transparency and investment options, the role of advisors and new reporting obligations, awareness and assessments of various types of commissions and fees.
“We commissioned the Gandalf Group to design a fact-based survey that was objective and focused on the interests of Canadian investors with respect to regulatory initiatives,” said Blake Goldring, Chairman and Chief Executive Officer, AGF Management Limited. “As a long-standing participant in the Canadian financial services industry we have always been an advocate for sound regulatory change that is grounded in the needs of investors.”
“We are pleased that this survey is addressing these investment issues head on. When it comes to investing, we want to know what is top of mind for Canadian investors to ensure the advisors we work with every day are armed with the research, products and services they need to help their clients reach their financial goals,” added Goldring.
Advisors Add Value
The survey found that most Canadian investors rely on advisors at least somewhat when it comes to helping with decisions about their portfolio. Nearly half said they rely on advisors to help make most or all investment decisions with them.
In accordance with the survey, advised investors are highly satisfied with the relationship they have with their advisor. Fully 70% are very satisfied and only 3% are very dissatisfied. Most advised investors gave very high satisfaction ratings to their advisors when it comes to providing unbiased advice, being transparent about fees and helping to manage costs of investing.
The most important reason for satisfaction with advisors is the bottom line. Investors who rely on advisors are much more likely to be highly satisfied with the growth and returns in their portfolio than investors who go without advice.
Advisor Compensation: Fees & Trailing Commissions
The survey also found that when it comes to trailing commissions, most investors said they considered them to be acceptable and no different than other forms of advisor compensation. While many admit they do not know a great deal about the trailing commissions they pay and about half say they have heard very little or nothing about trailing commissions, those who consider themselves to be knowledgeable about investing were more likely than others to say trailing commissions were acceptable.
A key to understanding investors’ assessments of fees is to consider their preferences in respect of how to pay their advisors and the ways in which compensation should be calculated. In a forced choice, the survey showed that investors tended to express a preference for fees based on investment value/performance rather than fees based on service provided or hourly rates. Investors expressed an even clearer preference for deducting fees from their investment portfolios rather than paying them in a direct charge or payment.
Furthermore, if the ability of investors to pay advisors indirectly from products they own were discontinued and advisors charged clients for advice and service directly, the survey found 24% of investors said it would make investors like them less likely to seek out advice from an advisor. This potential “advice gap” was consistent across all income sizes ranging from assets under $50,000 to those with over $500,000.
“As a firm, AGF is committed to providing investors and their advisors with choice. We believe advisors and their clients deserve the right to negotiate the appropriate compensation model in a transparent way that best meets their needs and as such, we will provide advisors and their clients with the product options they require to build their portfolio,” said Goldring.
Disclosure & Reporting
The Gandalf Group also found that most investors read their statements at least occasionally; half (51%) said they read every statement. Most said they were satisfied with the information they receive from their advisors, fund providers and financial institutions. In fact, a significant proportion (39%) has noticed improvements in the amount of information disclosed in the statements in recent years. Six out of 10 advised investors are aware of the new reporting rules introduced last year.
“Findings like these support our belief that regulatory changes – like CRM2 – have improved processes and increased transparency to Canadian investors and more broadly in the financial industry,” said Mark Adams, Senior Vice President, General Counsel, AGF Investments Inc. “As an industry, we need to let the latest regulatory changes play out and bring stability to our sector before proposing more changes.”
Methodology
The survey findings are based on a core sample of 1299 individual Canadian investors.
A detailed report on results is available for download from the Gandalf Group’s website at www.GandalfGroup.ca.
Survey interviews were completed online between April 7th and May 5th, 2017. The research methodology was designed by the Gandalf Group Inc., a Toronto-based consultancy that specializes in survey research and other quantitative/qualitative research methods.
For more about this research, contact [email protected] or 416-644-4120.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is a diversified global asset management firm with retail, institutional, alternative and high-net-worth businesses. As an independent firm, AGF strives to help investors succeed by delivering excellence in investment management and providing an exceptional client experience. AGF’s suite of diverse investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
AGF has investment operations and client servicing teams on the ground in North America, Europe and Asia. With over $36 billion in total assets under management, AGF serves more than one million investors. AGF trades on the Toronto Stock Exchange under the symbol AGF.B.
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