Clients with advisors are not that interested in investing, survey reveals

They know its important for wealth building, but they have other things to focus on

Clients with advisors are not that interested in investing, survey reveals
Steve Randall

Investors who work with financial advisors appear to be less interested in investing than those who go it alone, new research reveals.

A study by FAIR Canada has found that investing is a ‘low interest’ activity for those with advisors while DIY investors are more engaged. Many Canadians would rather leave the complexities of investing to their advisors while they focus on work, kids, and recreational activities.

This doesn’t mean that those with advisors don’t care what happens with their money, they see the importance of investing, but they often have limited understanding and are unable or unwilling to fully engage with the process.

“In a time of rising interest rates and affordability crisis, Canadians are often placing their future in the hands of investment advisors without asking the right questions,” said Jean-Paul Bureaud, FAIR Canada’s Executive Director. “Investors told us they not only struggle to understand the products they were recommended, but many also didn’t understand the type of advisor they were dealing with, or how their advisor was compensated.”

Fees are a key part of the lack of understanding identified in the survey with many respondents unsure of costs and how this impacts their investments. This is not helped by not being sure about the type of accounts they have – including mixing up common accounts such as RRSPs, TSFAs, GICs, mutual funds, and stocks.

Despite realising the importance of financial advisors’ professional credentials and qualifications, the survey found that many investors do not know what they mean in terms of the knowledge and expertise of advisors, although they feel that those with higher levels of achievement are likely to be better at managing their investments.

Most respondents expressed strong levels of trust in their advisors. Many work with advisors they found through a personal connection such as family, friends, or neighbours, or put their trust in their financial institutions. They generally believe that their advisor acts in their best interests, but those who see frequent investment gains reported higher levels of trust in their advisor.

Regular communication with their advisor is important, despite their lack of overall interest in investment activity. Even for those with high ROI, frequent interactions were essential and if this is lacking they may look elsewhere.  

DIY investing

Meanwhile, DIY investors are more likely to feel confident in their own knowledge of investing and, due to their high interest in self-directing their investments, they are keen to learn more about the products and opportunities available and spend more time engaging with the process.

Younger participants in particular, say they are using DIY investing platforms to educate themselves in investing.

However, fees are still opaque to many with few indicating that they have a strong understanding of how DIY investing platforms make their money.

“The report helps us better understand different types of investors. Most investors in the advisor-channels found investing difficult to comprehend and learn. So, it is no surprise to observe a tendency to blindly trust whatever their advisors told them. This exposes them to potential risks and makes them more vulnerable to bad advice,” said Bureaud. “Overall, I think one key take-away is that we need to do a better job of educating and preparing Canadians to invest.”