Nearly two thirds of investors don’t know how much they pay in annual fees, according to a new survey.
The survey, conducted by Justwealth Financial, also found that 65.1% of Canadians weren’t aware of upcoming changes to investment reporting requirements. The changes, known as Client Relationship Model-Phase 2 or CRM2, are intended to increase disclosure regarding fees and investment performance. CMR2 will take effect Friday.
“For a long time, Canadian investors have been kept in the dark about how fees are charged for investment services and the many associated conflicts of interest that can exist,” said Andrew Kirkland, president of Justwealth. “This veil of secrecy has contributed to an erosion of trust in traditional investment models. CRM2 will go a long way in repairing trust, and we applaud the upcoming changes.”
The survey also found that 51.3% of respondents ranked cost as the key factor in picking an online investment service.
“As investors come to understand exactly what they’re paying in fees, investment firms will be under the microscope to explain the value they provide their clients,” said James Gauthier, chief investment officer at Justwealth. “There’s been some scrambling and damage control within the industry in reaction to CRM2. By contrast, online investing platforms and robo-advisors are inherently built to deliver maximum value on minimal fees, while not compromising on product offerings or service levels.”
Still, the survey found that more than 80% of investors weren’t familiar with the services provided by robo-advisors.
“Robo-advisors have been around in Canada for a few years now, but awareness of what they are is still quite low,” Kirkland said. “We’re confident that as CRM2 comes into effect and Canadians understand the fees they’re paying for their investments, they will begin looking for more cost-effective solutions. looking forward, online investment management will have a big role to play in a more transparent, equitable investing services environment.”
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