FRSA research reveals fees and advice preferences of investors
New research from the FSRA reveals investor preferences on how they get advice and how much they are willing to pay for it.
The research asked consumers for their opinions earlier this year and found that two thirds of respondents, whether they work with a financial advisor or not, believe they have the knowledge to make financial decisions and a similar share are confident in making financial decisions.
Only about one third of poll participants said they work with a financial advisor or planner, with most saying that this is because their advisor has expertise that they do not have. The most common source of financial advice is word of mouth.
For those who do not work with a professional, most believe that their current financial situation does not make it worth it, although for the most vulnerable it is fees that are the biggest barrier. This cohort is also likely to say that they are not sure how to find the right advisor for them.
Respondents value personalized advice on a range of products and then making the choice of financial products themselves. This is followed by being advised on one specific financial product, while only around 10% want a list of financial products with no advice provided.
On the likelihood of using automated services for financial advice:
- 56% said they were likely to if it came with the option to speak with an advisor
- 51% said they would if they felt their data was secure
- 47% said if it is more accessible than an advisor (such as 24/7 availability)
- 40% said if it was cheaper than an advisor
- 38% said if there was no advisor offering services locally
Paying fees
Fees are always a pain point, but what would respondents be willing to pay if they had $10K to invest in seg funds?
Almost three in ten said they would not pay anything; 19% would not make a direct payment to an advisor but would prefer the insurer to pay upfront fees and ongoing commissions; 18% would pay an advisor a 1.5% fee each year out of the money invested while the insurer pays nothing to the advisor; and 26% would pay their advisor 3% upfront out of the amount they wish to invest and have the insurer pay ongoing commission to their advisor for providing financial advice about the product.
Those who are highly vulnerable are more likely to say they are currently paying directly out of pocket.
On the broader issue of fees, 34% of respondents pay their advisor a regular fee on an ongoing basis, 17% pay as they go, 9% paid a one-off fee when purchasing a product, 24% are not aware of paying any fees, and 17% do not know.
Asked about their preferred payment schedule, 31% said it depends on the amount they are investing, 28% prefer a regular ongoing fee, 15% would like to pay as they need advice, 10% would opt to pay a one off fee when purchasing a product, and 16% are not sure.
“By using research to better understand the trends and issues affecting consumers, we can help improve their lives and the lives of their families,” said Stuart Wilkinson, Chief Consumer Officer at FSRA. “Seeking sound and suitable financial advice has never been so important as it is today, and these findings will help us identify key opportunities to respond to the needs of and risks to Ontario consumers when it comes to receiving and paying for financial advice.”
