The Alberta Securities Commission (ASC) has released the results of a survey performed as part of its ongoing consultation on the CSA’s proposal to enhance investment industry representatives’ obligations toward clients. Aside from showing retail investors’ feelings toward a best-interest standard, it gives a glimpse of what they want from advisors.
Not surprisingly, returns are a major concern among Albertans. When asked what they think the term “best interest” means, they equated it with “best returns,” describing more about financial results than professional behaviour. Returns were also among the things they found important in an advisor, along with knowledge or expertise; disclosure and clear communication; and trust and understanding.
When it comes to client retention, professional conduct seems to matter. The most common problems participants had with an advisor in the past involved bad advice, not having their concerns heard, and lack of communication from their advisor. Less common but also mentioned were issues like greed, fraud, dishonesty, and lack of disclosure. Clients who had grievances generally left their advisor.
What about fees? When asked whether they would leave their advisor over a “small” fee increase, most participants said they wouldn’t — although they didn’t agree on how much a “small” increase would be. The ones who would leave because of fees would either find another advisor with more acceptable fees or attempt DIY investing, whether or not they were qualified.
The respondents generally supported the concept of a best-interest standard, but questioned whether it would be enforced, would be expensive to enforce, or could actually be enforced at all. They also doubted that such a standard would affect their behaviour: the ones who are engaged and proactive in researching investments would continue to do so, while those who don’t would not start.
Without being asked, those polled stressed the importance of increasing financial education in Alberta, particularly in schools, and enforcing both existing and proposed standards through measures including penalties. The ASC said that repeated mentions of enforcement and penalties suggest that enforcement initiatives might be as welcome as new standards.
The survey, which involved 44 Albertans in six focus groups over three locations, was conducted in September. Eighty-six per cent of them either currently work with a financial advisor or have worked with one in the past. Of the 38 participants who have or had an advisor, 21% have used multiple advisors for reasons including diversification, management of different account types, and following recommendations from family and friends.
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