Survey: A Disconnect Between Advisors and Investors

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By A Correspondent

A survey of advisors and investors across the country found that while investors see great value in the services provided by advisors, there are disconnects between what advisors are paid and what their clients think they are paying and how their advisors are being paid.

You may be particularly interested in these key findings from Ontario:

  • Nearly 80% of Ontario investors using financial planners only have one advisor to address all financial needs
  • 84% said they were comfortable with how their primary financial advisor is compensated
    • 82% said they understand how their advisor is compensated
  • While 83% of Ontario advisors say their compensation is commission; only 32% of Ontario investors thought their advisor was compensated on a commission and 21% said they did not know how their advisor was being compensated
  • 38% said they did not know how much they paid their advisor annually
    • Another 26% thought it was less than $2,000
  • However, the average Canadian investor has $216,200 with their primary advisor; at 1.5% of total amount invested, the average investor would pay their advisor $3,243 per year
  • While 65% of Ontario advisors thought their client would prefer they were commissioned based, only 23% of Ontario investors agreed – 50% would prefer their advisors were salary-based
  • Fortunately, 51% of Ontario advisors have actually considered switching to fee or fee-based practice – third highest in the country

"Investors do not have a clear picture of the amount and type of compensation they pay to advisors,” said Atul Tiwari, Managing Director of Vanguard Investments Canada. “This provides an opportunity for those advisors preparing for the implementation of new Client Relationship Model reforms which will require greater fee transparency, especially around trailer fees. We believe that this is a positive development for both investors and advisors.”

“As we have seen in the U.S. and other parts of the world, advisors are moving away from transactional, commission-based business models, to fee-based, holistic wealth planning models,” said Jason McIntyre, Head of Distribution for Vanguard Investments Canada.

Vanguard firmly believes in the value of the advice that financial advisors provide, and supports the fee-based model for the transparency that it affords investors. Low-cost investing is central to the fee-based model. The less clients pay, the more they keep, enabling advisors to attribute more of their fee structure to their true value as wealth managers and behavioural coaches.

The online survey of nearly 1,000 Canadian investors and more than 800 Canadian advisors was conducted in February and March 2013 by Rogers Publishing on behalf of Vanguard Investments Canada.

JULY 2018

Vol. 12 - No. 12


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