Based on preliminary data from the IFIC, RBC announced last week a total of $787 million in mutual fund net sales for the month of August. Their long-term funds performed particularly well, enjoying net sales of $831 million – a record that exceeds all previous August long-term mutual fund sales results.
The numbers came on the heels of a strong recovery period which, according to RBC Vice President and Head of Investment Solutions Jonathan Hartman, started in March this year.
“We’re coming out of a fairly difficult market period over the 12-month period from March 2015 to February 2016, and we’ve had a much stronger recovery in the period from March ’16 to July ’16,” he said in an interview with Wealth Professional. “What we’ve seen in the last quarter is that the clients are starting to move back towards a risk-on appetite [and putting cash to work].”
While the uptick in sales for RBC’s long-term mutual funds can be chalked up to increased investor confidence, Hartman doesn’t see it as a general confidence in mutual funds per se. “We had a very strong month, but I wouldn’t make a broad sweeping statement about the Canadian public [being] more interested in mutual funds. I think that we’re seeing a return to confidence and that more people are starting to put cash to work.”
In particular, he perceives two segments of the Canadian investing public that are shifting towards bullishness.
“You have people who are in their prime savings years. They tend to be the largest influencers of investment today: people starting to think about longer-term retirement plans that they need for growth, putting money back to work that may have been sitting in a bank account, a savings deposit or a GIC.
“But you’re also seeing a growing segment of millennial investors becoming interested in markets through a variety of means, whether that’s working with an advisor, or starting to do more research themselves online or through channels that allow them to access the markets themselves directly,” he said. “Millennials today are greater in numbers than maybe they are in economic dollars, but it’s definitely a signal for the future.”
How did this increased confidence arise? There could be hundreds of factors at play, but at least a few of them may be the fruits of efforts by RBC.
“The majority of 2015 and early 2016 was challenging for investors… and we spent a lot of time providing investment insight and helping people with context for what was happening in the market. You tend to have more conversations, and it’s important to have more conversations when markets are challenging, and that’s helpful in building people’s confidence as markets recover,” Hartman said.
“And the second part of that is the [portfolio] solutions that we deliver to clients… They follow an active approach to asset allocation and leverage our global investment capabilities, so we’re able to provide a very diverse, very sophisticated investment solution for clients to give them exposure to fixed-income and equity markets around the world but make it very easy for [clients] to invest in them.”
A third factor is the fact that in June, RBC implemented across-the-board fee reductions for their mutual fund lineup. “[W]e reduced our management fees even further to the point where on average, our series F management fees are over 20% lower than our competitors’ averages. Twenty to twenty-five basis points lower places an extra quarter of a percentage in our clients’ pockets every year. And that is also a catalyst for clients’ interest, clients’ confidence, and clients’ trust in our firm.”
RBC has record August
RBC reduces mutual fund fees