Owners of ETFs and mutual funds have come to a better appreciation of how much they pay for investments and advice
Mutual-fund and ETF investors alike are getting more savvy on fund fees and advisor compensation — at least, that’s what new findings released by the Investment Funds Institute of Canada (IFIC) suggest.
The newly released Canadian Mutual Funds and Exchange-Traded Fund Investor Survey, done in partnership with Pollara Strategic Insights, was based on telephone interviews conducted with 1,024 mutual-fund investors and 500 ETF investors from late May until June this year.
While previous versions of the study focused on mutual funds, this year’s research included Canadian ETF holders as a distinct group, providing new insights with respect to their specific attitudes, opinions, needs, expectations, and behaviours.
Lasting effects from CRM2 changes
According to the survey, nearly nine in 10 investors (88%) have had some conversation with their advisors about fees or compensation. Among those who purchased mutual funds from an advisor, 76% said the advisor had talked to them about fees, a considerable increase from the 58% who had such conversations last year and 64% who reported such talks at the start of CRM2 in 2017.
The report also discovered increases in the number of advised investors whose advisors talked to them about MER (67% this year, up from 59% last year and 56% in 2017), as well as those who talked about fees paid to the firm (63% this year, from 58% last year and 52% in 2017).
“The likelihood of advisors covering a number of topics in their conversations is the same among mutual fund and ETF investors,” the report said. This included:
- Suitability of investments (91% of mutual-fund investors, 90% ETF investors);
- Buying/selling fees (76% of mutual-fund investors, 77% of ETF investors);
- MERs (67% of mutual-fund investors, 71% of ETF investors); and
- Advisory firm fees (63% of mutual-fund investors, 69% of ETF investors)
Gaps in fee knowledge and compensation preferences
Comparing the two groups revealed similar percentages of people who were confident in their knowledge of the fees they pay (84% of mutual-fund investors, 86% of ETF investors) though ETF investors were more likely to say they were very confident (32%) than mutual-fund investors (15%).
ETF investors were also more likely to get information about fees from sources other than advisors or investment statements (44% vs. 20% of mutual-fund investors).
And when it came to their preferred method to compensate advisors, mutual-fund investors tended to prefer paying through mutual fund fees (52%) than through a direct fee for ongoing advisory services (40%). Looking at ETF investors, meanwhile, shows a more even split, with 47% preferring fees that reduce their investment returns and 46% more partial to ongoing advisory service fees.