August 18, 2017 13:30
Photo : Freepik
A year after the entry into force of the MRCC2, forcing the firms investment advice to disclose more information concerning their fees to the clients, most investors still do not understand these fees. Such are the conclusions of a report from J. D. Power recently published, according to which less than a quarter of investors say they have a full understanding of the fees they pay to their investment advisors.
«Disclosure does not mean transparency, analysis Mike Foy, senior director of wealth management at J. D. Power. Yes, investment companies in Canada must disclose more information about their costs, pursuant to the requirements of the new Model of adviser-client relationship (MRCC2), but our data indicate that the message is not always sufficiently well understood. The establishment of a clear link between the fee charged and the amount paid is a very important element for the advisors of full year, especially now that they are faced with new threats coming from generational changes and technology, which have exposed a large portion of the assets of customers at risk of attrition. «
The advisors pointed out
Thus, according to the study, the costs still remain mysterious. Only a quarter (23 %) clients of investment advisers have found any change during the past year on the way in which information relating to costs and performance have been provided by their consulting firm. The number of investors stating fully understand the expenses do not exceed 24 %, compared to 27% in 2016.
In addition, over a third (36 %) of clients indicate that their financial advisor has not clearly communicated the reasons for the performance of their investments, and 41 % indicate that their adviser had not explained the charges. Even among clients who were aware of the new disclosure requirements and which have had a conversation about it with their advisor, only 35 % say they fully understand their costs.
The milléniaux prefer the robot-advisor
Finally, and even though they only account for 5 % of all the investors of full financial year, 21 % of milléniaux affluent (with more than $ 100,000 in investable assets) indicated that they would definitely or probably their current advisor in the next 12 months. The milléniaux are also more likely to have used a robot-adviser (23 %), suggesting that even investors wanting to stay with a traditional advisor could be open to the reallocation of certain assets to the modes of commission of alternative and less expensive.