New report suggests an uneasy advisor-client relationship but one likely to endure
Relationships are key to clients staying with their financial advisor, but is there more work needed to ensure their longevity?
A new report from FAIR Canada shines light on the advisor-client relationship, revealing mixed results and some areas that may need some attention.
First, the good news. The results show that almost 80% of investors use an advisor and most rely heavily on their advisor’s advice, however most investors admit they lack confidence to act alone.
“Retail investors with limited investment knowledge rely extensively on their advisor—this places investors in a vulnerable position,” said Jean-Paul Bureaud, executive director of FAIR Canada.
Most investors say that they trust their advisor, although this was linked to advice channel with banking lagging. Investors also believe they must look after themselves, especially given some clear concerns.
More than 40% had concerns that their advisor may behave unethically or improperly, nearly 60% worried they may be sold an unsuitable product.
More than 60% reported not understanding the fees they pay, and almost 80% are concerned they are paying too much in fees.
“The findings underscore the importance of establishing high regulatory, ethical, and proficiency standards for advisors to support this degree of reliance and to build trust,” added Bureaud.
Mutual fund bias?
The report also found that investors believe advisors are biased towards mutual funds.
Respondents felt that advisors tend to place clients in mutual funds, which frequently have higher fees compared to ETFs. DIY investors polled are more likely to hold a more balanced portfolio of mutual funds and ETFs.
FAIR Canada’s research, conducted in December 2022, also profiled investors and their approach to investing.
Most investors are employed, university-educated, started investing before age 35, invest primarily through registered accounts, have a median household income of $96,000, while the median amount invested is $125,000.
Along with mutual funds and ETFs they are most likely to hold equities and GICs and cite retirement as their main reason for investing.
The full report is available at faircanada.ca.