Report on Retail Investor Information Survey

A Report to The Joint Standing Committee on Retail Investor Issues

Retail Investor Information Survey

June 2009

A Report to The Joint Standing Committee on Retail Investor Issues: Retail Investor Information Survey

Table of Contents

I. Introduction ..........................................................................................................................1 A. Methodology....................................................................................................................................2 B. Executive Summary ........................................................................................................................3

II. Context..................................................................................................................................3 A. Frequency of Using an Advisor .......................................................................................................3 B. Types of Investment Products held by Canadian Investors who use an Advisor ...........................3 C. Top Sources of Investment Information ..........................................................................................3

III. Decision Making...................................................................................................................3 A. Most Recent Product Acquired .......................................................................................................3 B. Expectations of Risk and Return on the Most Recent Investment Purchase. ................................3 C. General Assessments of Risk and Return ......................................................................................3 D. Research and Advice: Decision Making.........................................................................................3 E. In retrospect: Evaluating whether the Information Respondents Received was Correct...............3

IV. Quality and Quantity of Information about Investing .......................................................3 A. Channels of Information ..................................................................................................................3 B. Quantity of Information....................................................................................................................3 C. Quality of Information ......................................................................................................................3 D. Information about Risk and Return .................................................................................................3

V. Demographics ......................................................................................................................3

A Report to The Joint Standing Committee on Retail Investor Issues: Retail Investor Information Survey 1

I. Introduction


Introduction

The Strategic Counsel is pleased to present the following report on Retail Investor Issues to the Joint Standing Committee on Retail Investor Issues.

A. Methodology Findings are based on a total of 1000 online interviews conducted among Canadians who reported that they use an investment advisor when making investment decisions. The interviews were conducted during April 6th and April 13th, 2009.

The survey was designed to explore issues related to the information that investors are seeking and receiving when making investment decisions. Issues explored with the target audiences include:

• Perceptions of the amount, type and quality of information provided by advisors;

• The ways in which investors make decisions, including information sources used, when purchasing investment products; and

• The quality and quantity of information that retail investors seek and receive when making investment decisions.

• The kinds of information retail investors would like to have and how this information should be provided.

Please note that due to rounding, not all percentages add up to 100%.

Important Note when Interpreting the Data: All respondents are engaged in the capital markets and use a financial/investment advisor. Results from this survey are illuminated by comparing two groups of respondents with differing levels of self-described knowledge regarding investing – those reporting less knowledge and those reporting a greater degree of knowledge. While the impact of current market and economic conditions upon the size and attitudes of these groups is unknown, it is important to note that this context exists.


Introduction

B. Executive Summary The following summarizes the main findings obtained from the survey of Canadians who use a financial/investment advisor at least occasionally when making investment decisions.

Findings are grouped into three sections. The first consists of general questions that provide a profile of respondents. The second deals with various issues related to participants’ most recent investment decision/purchase. The third focuses on general questions about the information respondents received from their advisors and from other sources and explores their perceptions of the information they receive.

Although survey respondents provided some examples of sources of information used (annual reports, prospectuses, websites), the survey did not identify other sources of information, nor did it explore how respondents actually used these sources of information. Context:

In order to qualify for inclusion in the survey participants had to use an investment advisor on at least an occasional basis. However, in fact, most respondents use their advisors on a relatively frequent basis.

• The majority (60%) indicate using their advisor either all or most of the time when making investment decisions.

• A plurality (34%) report using their advisor all of the time.

• Conversely, two-in-five (40%) indicate using their advisor sometimes/occasionally.

When selecting an advisor, respondents indicate that experience trumps all other criteria including training and education.

• When respondents are asked to cite the three most important things they want to know when selecting an advisor, experience is listed most frequently (71%).

• Their advisor’s experience is more frequently cited than whether the advisor is registered with a securities regulator (49%), referrals (49%), the advisor’s professional credentials (42%) or the advisor’s training and education (36%).

Virtually all respondents look to their advisors as a principal source of investing information, while a substantial proportion also looks to friends and family.

• Virtually all respondents (91%) consider their financial/investment advisor to be among their top-3 sources of information guiding their investment decisions.

• However, a sizeable proportion (65%) also seeks out information from friends and family.

• Smaller groups cite newspapers (33%), annual reports (31%), financial advice websites (31%) and prospectuses (26%) as being among their top-3 sources of investment information.

Most respondents consider themselves relatively knowledgeable about investing.


Introduction

• Nearly two-thirds (65%) report being very/somewhat knowledgeable compared to a smaller group (35%) who consider themselves not too/not at all knowledgeable.

In terms of the kinds of investment instruments held, the vast majority of respondents report holding mutual funds (74%) followed by stocks or shares (34%), GICs (34%), RESPs (22%) and savings bonds (14%). A further 12% hold somewhat more advanced products, such as exchange traded, segregated, and hedge funds, options, income trusts and TFSAs.

More detailed analysis of findings indicates a variety of key differences by the investor’s self reported knowledge and included:

Sources of information about investing vary between self-described knowledge groups.

• Those with greater self-reported knowledge levels are less likely to look to friends and family as a source of investing information than those with lower levels of self-reported knowledge (58% vs. 77%).

• Those with greater levels of self-described knowledge are more likely to report that they use prospectuses (28% vs. 22%) and financial advice websites (35% vs. 24%) than those who describe themselves as having less knowledge.

The types of products held vary according to respondents’ levels of self-described knowledge.

• Those describing themselves as having more knowledge are more likely to possess advanced investments (derivatives, Principle Protected Notes [PPNs], income trusts, Exchange Traded Funds [ETFs], Options, Segregated Funds, Hedge Funds) in their portfolios than those reporting lower levels of knowledge (16% vs. 6%)

• Those describing themselves as having more knowledge are also more likely to hold stocks and bonds (excluding savings bonds) than those reporting lower levels of knowledge (43% vs. 23%).

Decision Making

In order to explore the decision making process, respondents were asked a series of specific questions about their most recent investment purchase using an advisor.

As part of their most recent investment purchase:

• The majority purchased mutual funds (52%)

• Much smaller proportions purchased GICs (14%), stocks or shares (11%) and RESPs (10%).

Two prime factors stood out when assessing an investment product.

• Most say they were influenced by the “chance of making money” (62%) and their “investment objectives” (57%).

• They were less likely to be influenced by current news about market conditions (33%) and how much money they can afford to lose (32%).


Introduction

The majority report that their knowledge of the workings of their most recent investment purchase does not exceed a basic level of understanding (59%).

• Nearly half (47%) report having a basic understanding.

• Slightly more than one-in-ten (12%) say that they have no understanding at all because “that’s my advisor’s job.”

• Conversely, 41% report having that they have a good/thorough understanding.

However, when assessing an investment product, respondents are far more likely to consider their advisor’s knowledge of the product (78%) than their own knowledge (53%).

• Their advisor’s knowledge of the product is more important than the terms of the investment (59%), time commitment of the investment (46%) and the reputation of the portfolio or fund manager (42%).

Most want to receive information from their advisor prior to making a purchase decision and would postpone this decision until information is available.

• Only 4% say that receiving the information after the decision would be fine as long as it can be received during the cancellation period.

• Only one-in-five (21%) say that it doesn’t matter when the information is received as long as they know where it can be accessed if needed.

• Three-quarters (74%) indicate that they want to receive information from their advisor prior to making their purchase decision.

• Amongst those who say that they want to receive information prior to making their purchase decision, more than three-quarters (78%) say that they would postpone their decision until that information was available.

Nonetheless, most respondents commit less than fifteen minutes to perusing informational documents provided by their advisor.

• Prior to their investment decision, more than one-third (35%) did not review the information that their advisor provided for them.

• One-quarter (26%) took less than 15 minutes to review the documents.

• However, 39% express the belief that they took “as long as it took to carefully read all the documents” their advisor provided for them.

The majority possesses a balanced view about risk and return on their most recent investment purchase.

• When making their most recent investment purchase, most respondents expected medium risk (52%) and medium returns (55%).

However, there is evidence of an asymmetry between expectations of risk and return.


Introduction

• Concerning their most recent investment purchase, few respondents expected low returns (13%), but a substantial proportion thought there would be low risk (37%).

• On the other hand, a sizeable proportion expected high returns (32%), but a much smaller number thought there would be high risk on their investment (12%).

Despite this asymmetry, almost all respondents (84%) believe that they had the right amount of information to make their investment decision.

There is however some indication that those who did not receive enough information would like more education.

• Among this group, 13% identify their ‘own research/understanding/lack of knowledge’ as the critical missing information.

• Perhaps indicative of a lack of knowledge, one-quarter (26%) did not identify which critical information was missing.

Once again, analyzing this data in light of self-described knowledge groups yields interesting findings:

Those reporting less knowledge exhibit more cautious attitudes towards their most recent investment purchase than those reporting more knowledge.

• They are less likely than those reporting more knowledge to be tolerant of risk and are less likely to expect high returns.

Moreover, those reporting less knowledge are also less likely to exhibit a belief in their ability to calculate risk and return.

• These individuals are less likely than those reporting more knowledge to consider current market conditions (28% vs. 36%) and less likely to consider their ‘investment objectives’ when picking an investment product (63% vs. 46%).

• They are also more likely than those reporting more knowledge to fear the loss of money when making an investment decision (43% vs. 35%).

Those reporting lower levels of knowledge also appear to be more likely to use their advisor as an exclusive source of information when making investment decisions.

• They are more likely than those reporting more knowledge to base their decision solely on their advisor’s verbal recommendation (36% vs. 20%).

• Compared to those who reporting more knowledge, they constitute a significantly smaller proportion of those who ‘carefully read’ the documents provided by their advisor (24% vs. 76%).

• When making investment decisions, they are less likely to draw information from prospectuses (20% vs. 37%), annual reports (24% vs. 40%) and newspapers (15% vs. 25%).


Introduction

There is some indication that those reporting less knowledge are less comfortable with their investment decision.

• They are far less likely than those who report more knowledge to report that they received the right amount of information to make their investment decision (68% vs. 93%)

Quality and Quantity of Information:

Respondents place a great deal of importance on the information they receive from their advisor.

• All respondents indicate that information about risk and return is very or somewhat important, with the vast majority indicating that this is very important (84%).

Most respondents give high ratings to the quantity and quality of information provided by their advisors.

• A large majority indicate that they receive the right amount of information (73%).

• Many indicate that they receive enough information about risk and potential returns (73%) as well as fees (65%).

However, respondents indicate that they do not get enough information about potential conflicts of interest that may exist between advisors or their advisor’s firm and the investments that are being recommended.

• More than one-third (35%) say that they do not get enough information on this subject.

• Almost one-fifth (17%) do not know whether they get enough information on this subject compared to the small proportions that do not know whether they get enough information about risk/return (1%) and fees (4%).

Those reporting less knowledge also diverge from those reporting more knowledge when it comes to the way in which they rate several aspects of the information they receive.

• They are more likely than those reporting greater knowledge to believe they receive too little information (24% vs. 12%).

• They are less likely to believe that they receive enough information (62% vs. 79%).

• They are less likely to indicate that information is easy to understand (44% vs. 82%).


II. Context


Context

A. Frequency of Using an Advisor Even though all respondents have a financial/investment advisor, the frequency with which they use their advisor varies. Nonetheless, the majority (60%) use their advisor all or most of the time when making investment decisions.

The table on the following page indicates that the frequency with which investors use their advisor is not strongly associated with their levels of perceived knowledge. Individuals who report having more knowledge about investing are not significantly more likely to use their advisor on a more frequent basis than those who report lower levels of knowledge (59% vs. 62%).

16

Q. 3. When making investment decisions, how often do you use a financial/investment advisor?Base: Total sample

625960NET: All/Most of the time

384140Net: Sometimes/Occasionally

212020Occasionally

21

28

31

%

653

Very/Somewhat knowledgeable

Investing knowledge

17

25

38

%

347

Not too/ Not at all knowledgeable Total Sample

1000n=

%

20Sometimes

27

34

Most of the time

All the time

Frequency of using an advisor compared between self-identified knowledge groups.


Context

B. Types of Investment Products held by Canadian Investors who use an Advisor An overwhelming majority of Canadian investors who use a financial advisor report that their portfolios contain a combination of Mutual Funds and RRSPs (78%). A substantial proportion also possess fixed income investments such as GICs, Savings Bonds, Money Markets, TFSAs and HISAs (43%). In fact, fixed income investments are more commonly held than stocks, shares or bonds (excluding savings bonds) (43% vs. 36%). However, only one-in-ten (13%) hold advanced investments such as income trusts, segregated funds, derivatives, hedge funds and options.

The table on the following page indicates that respondents’ self-described investing knowledge and the frequency with which they use a financial advisor corresponds with the investment products that they likely possess.

12

74

34

34

22

14

8

5

5

5

2

2

1

4

0% 20% 40% 60% 80% 100%

Q. 2. What type of investments do you have? Check all that applyBase: Total sample

Total Sample

n= 1000

%

Mutual funds

Stocks or shares

GICs

Registered Education Savings Plan (RESP)

Savings Bonds

Bonds, excluding Savings Bonds

Income Trusts

Segregated Funds

RRSP

Options

Exchange Traded Funds

Hedge Funds

Other/PPNs/TFSAs

Investment products held.

4Other

13NET: Advanced Investments

22NET: RESP

36NET: Stocks/Shares/Bonds

43NET: GICs/Savings Bonds/Money Market/TFSA/HISA

78NET: Mutual Funds/RRSPs

%

1000n=

Total Mentions


Context

Those who report greater personal investing knowledge are more likely to have invested in advanced investment products and stocks/bonds than those who are less knowledgeable. Those who describe themselves as more knowledgeable are more likely to have invested in stocks/shares/bonds (excluding savings bonds) than those who describe themselves as less knowledgeable (43% vs. 23%). Moreover, those describing themselves as more knowledgeable are also more likely to have invested in Advanced Investments than those describing themselves as less knowledgeable (16% vs. 6%).

Nonetheless, the frequency with which respondents use their advisor when making their investment decisions has relatively little impact on whether they have invested in these more complex investment products. Those who use their advisor all/most of the time are no more likely to have invested in stocks/shares/bonds than those who use their advisor sometimes/occasionally (37% vs. 34%). Moreover, it cannot be said with a high degree of confidence that those who use their advisor sometimes/occasionally are less likely to have invested in advanced investments than those who use their advisor all/most of the time (10% vs. 14%).

13

Investment products held – by investing knowledge and the frequency of using an advisor.

Sometimes/ Occasionally

4

10

21

34

49

72

%

396

3

14

22

37

39

81

%

604

All/Most of the Time

Use/Financial Investment advisor

212222NET: RESP



344Other

43

44

%

653

Very/ Somewhat knowledgeable

Investing knowledge

23

40

%

347

Not too/ Not at all knowledgeable

Total Sample

1000n=

%


43NET: GICs/Savings Bonds/ Money Market/TFSA/HISA

Q. 2. What type of investments do you have? Check all that applyBase: Total sample


Context

However, it does appear that those who use their advisor more frequently are significantly more likely to possess Mutual Funds/RRSPs (81% vs. 72%) and less likely to possess fixed income investments (39% vs. 49%) than who use their advisor less frequently when making investment decisions.

C. Top Sources of Investment Information Not surprisingly, virtually all respondents (91%) consider their financial/investment advisor or broker to be among the top-3 sources of information guiding their investment decisions. However, a sizeable proportion (65%) also relies on friends and family as a top-3 source of information.

Respondents with different levels of self-described investing knowledge exhibit divergent tendencies as to the sources of information that they value. Those with less knowledge tend to value more informal sources of information.

Those who describe themselves as not too/not at all knowledgeable with respect to investing are more likely to value friends and family than those who describe themselves as very/somewhat knowledgeable (77% vs. 58%). Alternatively, those with greater degrees of investing knowledge are more likely to rely on prospectuses (28% vs. 22%) and financial advice websites (35% vs. 24%) than those who describe themselves as less knowledgeable.

Experience is the attribute that respondents value most when selecting an advisor (71%). Formal qualifications, such as registration with a securities regulator (49%), professional credentials (42%) and training and education (36%) do not factor as importantly, but are still of importance, as are the fees charged by an advisor (40%).


Context

19

Q. 4. What are the top three sources of information that you use to guide your investment decisions? Please select only threeBase: Total sample

212None/Note Stated

576Other

111On line chat rooms

243531Financial advice websites

323333Newspapers

111010Magazines

565Regulatory Organizations

293131Annual reports

222826Prospectus/offering documents for the investment

89

58

%

653


Investing knowledge

93

77

%

347


Total Sample

1000n=

%

91Financial/investment advisor/broker

65Friends/family

Top-3 sources of investment information compared between identified knowledge groups.


Context

20

Total Sample

n= 1000

%

Training/education

That they are registered with a securities regulator

Fees they will charge

Experience

Professional credentials

Disciplinary history

Job title suggests that they are fairly senior in the organization

Referral from someone you trust

Other

36

49

40

71

42

6

4

49

4

0% 20% 40% 60% 80% 100%

Q. 5. In selecting an advisor, which are the three most important things you want to know about the advisor? PLEASE RANK THESE (1, 2, 3) IN ORDER OF IMPORTANCEBase: Total sample

The three most important things respondents want to know when selecting an advisor.


III. Decision Making


Decision Making

A. Most Recent Product Acquired Consistent with the composition of respondents’ portfolios, half of those interviewed (55%) report that their most recent investment purchase involved the acquisition of Mutual Funds and RRSPs. Significantly smaller proportions purchased fixed income investments (16%), stocks, shares or bonds (13%), RESPs (10%) and advanced investments (4%).

Nonetheless, the majority of respondents are not particularly confident in their ability to understand how their most recent investment purchase works. Fully half (47%) report that they have only a basic understanding of the workings of their most recent investment, while one-tenth (12%) indicate that they have no understanding at all, and that this is their advisor’s job.

22

52

14

11

10

3

2

1

1

1

1

0

0

0

2

0% 20% 40% 60% 80% 100%

Q. 6. What was your most recent investment purchase where you used an advisor?Base: Total sample

Products acquired in respondents’ most recent investment purchase.

Total Sample

n= 1000

%

Mutual funds

GICs

Stocks or Shares

Registered Education Savings Plan (RESP)

RRSP

Bonds, excluding Savings Bonds

Segregated Funds

Savings Bonds

Options

Income Trusts

Hedge Funds

PPN

Exchange Traded Funds

Other

2Other


10NET: RESP


16NET: GICs/Savings Bonds/Money Market/TFSA/HISA


%

1000n=

Total Mentions


Decision Making

23

12

47

32

9

0% 20% 40% 60% 80% 100%

How well do you understand how that investment works?

Q. 7. How well do you understand how that investment works?Base: Total sample

Total Sample

n= 1000

%

Not at all –that’s my advisor’s job

Basic understanding

Good understanding

Thorough understanding

Extent to which respondents understand how their most recent investment purchase works.


Decision Making

B. Expectations of Risk and Return on the Most Recent Investment Purchase.

Examining combined levels of risk and netted returns reveals that most expected medium levels of risk (52%) and medium levels of return (55%) on their most recent investment purchase. However, respondents’ expectations of return on that purchase do not neatly follow their expectations of risk. The relationship between low risk and low return as well as high risk and high return is asymmetrical. Few respondents expect low returns (13%), but over one-third (37%) expect low risks. On the other hand, one-third (32%) expect high returns, but only one-tenth (12%) expect high risk.

The subsequent table indicates that respondents describing themselves as more knowledgeable exhibit greater risk tolerance and expect higher returns than those who describe themselves as less knowledgeable. Respondents who are more knowledgeable are more likely to have expected to purchase a high risk

25

Expectations of risk and return.

Total Sample

n= 1000

%

Low risk, low return

Low risk, medium return

Low risk, high return

Medium risk, low return

Medium risk, medium return

Medium risk, high return

High risk, low return

High risk, medium return

High risk, high return

Don’t know/Not sure

7

22

8

5

30

17

1

3

7

1

0% 20% 40% 60% 80% 100%

Q. 8. What were your expectations for the amount of risk involved, (that is in losing money) compared with the return on that investment? Base: Total sample

37%

52%

12%

Total Sample

n= 1000

%

Low return, low risk

Low return, medium risk

Low return, high risk

Medium return, low risk

Medium return, medium risk

Medium return, high risk

High return, low risk

High return, medium risk

High return, high risk

Don’t know/Not sure

7

5

1

22

30

3

8

17

7

1

0% 20% 40% 60% 80% 100%

13%

55%

32%


Decision Making

investment than those who are less knowledgeable (13% vs. 8%). Similarly, respondents reporting more knowledge are more likely to expect that their most recent purchase will yield high returns (35% vs. 26%)

Conversely, those describing themselves as less knowledgeable report having been more cautious when making their most recent investment decision. Those describing themselves as less knowledgeable are more likely to have expected their most recent purchase to be a low risk investment (46%) relative to the self-reported more knowledgeable (32%). Those describing themselves as less knowledgeable are also more likely to have expected their most recent purchase to yield low returns (17% vs. 10%)

Overall, the implication here is that irrespective of the level of self-reported knowledge, there is some asymmetry between the expectation of risk and return, with more anticipation of higher returns (32%) than high risk (12%). Conversely, while 37% see their most recent investment as low risk, only 13% expect a low return.

26

Expectations of risk and return compared between groups of self-identified knowledge levels.

2<11Don’t know/Not Sure

RETURN

171013NET: Low Return

575555NET: Medium Return

263532NET: High Return

RISK

463237NET: Low Risk

445551NET: Medium Risk

81312NET: High Risk

%

653


%

347


Investing Knowledge Total Sample

1000n=

%

Q. 8. What were your expectations for the amount of risk involved, (that is in losing money) compared with the return on that investment?Base: Total sample


Decision Making

C. General Assessments of Risk and Return The following table further suggests that those who report less knowledge are less tolerant of risk when it comes to making investment decisions in general. While all respondents are equally likely to be motivated by the chance of making money (62%), those reporting less knowledge are more likely to be influenced by the chance of losing money than those who report greater knowledge (43% vs. 35%). On the other hand, those reporting more knowledge indicate that they are more likely to assess risk and return when making an investment decision. They are more likely to be influenced by their investment objectives (63% vs. 46%) and current news about market conditions (36% vs. 28%), all suggesting a greater sophistication among this group.

46

Q. 17. When assessing an Investment product, (like a security or a derivative) which of the following factors would influence your investment decisions? CHOOSE ALL THAT APPLY.Base: Total sample

111Do not consider any factors

111Other

283633Current news about market conditions

466357Your investment objectives

293332How much money you can afford to lose

54

35

62

%

653


Investing knowledge

52

43

62

%

347


1000n=

%

53How much money have you to invest

38

62

Chance of losing your money

Chance of making money

Priorities that influence respondents’ investment decisions compared between groups of self-described knowledge levels.


Decision Making

D. Research and Advice: Decision Making Respondents name their advisor’s knowledge of the investment product itself as the most significant factor affecting their investment decisions (78%). This factor is more important than information about the investment such as interest rates and fees, (59%), or the time commitment of the investment (46%). Notably, it is also substantially more important than respondents’ own knowledge of the investment product (53%).

Consequently, a substantial number of respondents sought out their advisor to some extent when making their most recent investment decision. Fully one-quarter (26%) report that they decided based solely on their advisor’s verbal recommendation. Likewise, one-fifth (19%) skimmed the documents their advisor provided and decided based on their advisor’s verbal recommendation. Alternatively, only one-tenth (10%) decided based solely on their own research.

The remainder report that they “carefully reviewed their documents, listened to their advisor’s recommendation and considered their own research,”(23%) or ”carefully reviewed their advisor’s documents, decided based on those documents and the advisor’s verbal recommendation,” (21%).

Those who were more likely to use their advisor as the sole information source in the decision-making process tend to describe themselves as being less knowledgeable about investing in general. Those who are less knowledgeable are also far more likely to have based their decision solely on their advisor’s verbal recommendation (36%) compared to those who are more knowledgeable (20%).

One-quarter (26%) reviewed the documents for less than fifteen minutes before making their decision. Moreover, one-third (35%) did not review the documents their advisor provided at all.

On the other hand, those who are more knowledgeable are more likely to have decided solely based on their own research (12%) , independent of the information their advisor provided, versus those who characterize themselves as less knowledgeable (6%). Four-in-ten of such respondents (40%) report that they reviewed any documents for “as long as it took to carefully read” them. Respondents who report having reviewed any documents for “as long as it took to carefully read them” are overwhelmingly comprised of individuals reporting to be very/somewhat knowledgeable (76% vs. 24%). Moreover, those who “carefully reviewed” their advisor’s documents constitute the vast majority (86%) of those who say that they explored the documents “for as long as it took”; suggesting a careful approach to investing.


Decision Making

47

Total Sample

n= 1000

%

Your knowledge of the investment product

Your advisor’s knowledge of the investment product

Reputation of portfolio manager or fund manager

Ease of trading

Terms of the investment such as interest rates and fees

Time commitment of the investment

If the dealer gets a commission for selling the product

Other

53

78

42

18

59

46

15

1

0% 20% 40% 60% 80% 100%

Q. 17. When assessing an Investment product, (like a security or a derivative) which of the following factors would influence your investment decisions? CHOOSE ALL THAT APPLY.Base: Total sample

The most important factor influencing respondents’ investment decisions.


Decision Making

30

Q. 9. How did you go about making this investment decision?Base: Total sample

222Other, specify

362026Decided based on your advisor’s verbal recommendation only.

61210Decided solely based on your own research, independent of the information your advisor provided.

29

23

14

%

653


Investing knowledge

12

16

28

%

347


Total Sample

1000n=

%

23Carefully reviewed documents your advisor provided, listened to their recommendation and considered your own research.

21

19

Carefully reviewed documents your advisor provided and decided based on these documents and the advisor’s verbal recommendation.

Skimmed documents your advisor provided and decided based on the advisor’s verbal recommendation.

Extent to which respondents read documents or decided solely on advisor’s verbal recommendation by self-described knowledge groups.


Decision Making

32

Total Sample

n= 1000

%

Minute or less

1-2 minutes

Less than 5

Less than 15

As long as it took to carefully read all documents

Did not review information provided by advisor

1

2

5

18

39

35

0% 20% 40% 60% 80% 100%

How much time did you spend doing this?

Q. 10. How much time did you spend in doing this:Base: Total Sample

Time spent reviewing documents.


Decision Making

33

Q. 9. How did you go about making this investment decision?Q. 10. How much time did you spend in doing this:Base: Total samplec: Cautions when interpreting results - Small Base Size

Extent to which respondents considered advisor’s verbal recommendation / read documents by time spent reviewing documents.

Total Sample

Q10. How much time did you spend in doing this?

Less than 2 minutes Less than 5 minutes Less than 15 minutesAs long as it took to carefully read the

documents

Did not review information provided

by advisor

n= 1000 25c 53 184 388 350

% % % % % %

Skimmed documents your advisor provided and decided based on the advisor’s verbal recommendation.

19 80 60 52 10 -

Carefully reviewed documents your advisor provided and decided based on these documents and the advisor’s verbal recommendation.

21 8 25 27 37 -

Carefully reviewed documents your advisor provided, listened to their recommendation and considered your own research.

23 8 11 19 49 -

Decided solely based on your own research, independent of the information your advisor provided.

10 4 - - 1 27

Decided based on your advisor’s verbal recommendation only. 26 - 2 - 1 73

Other, specify 2 - 2 3 3 -

Q.9.H

ow did you go about m

aking this investment decision?


Decision Making

34

Q. 9. How did you go about making this investment decision?Q. 26. How knowledgeable do you consider yourself to be?Base: Total samplec: Caution when interpreting results - Small Base Size

Total Sample

Q10. How much time did you spend in doing this?

Less than 2 minutes Less than 5 minutes Less than 15 minutesAs long as it took to carefully read the

documents

Did not review information provided

by advisor

n= 1000 25c 53 184 388 350

% % % % % %

NET: Very/Somewhat Knowledgeable 65 52 53 60 76 59

Very Knowledgeable 6 4 - 5 9 4

Somewhat Knowledgeable 60 48 53 55 67 55

Not too Knowledgeable 30 20 40 34 22 35

Not at all Knowledgeable 5 28 8 6 2 5

NET: Not too/Not at all Knowledgeable 35 48 47 40 24 41

Knowledge by time spent reviewing documents.

Q26. H

ow know

ledgeable do you consider yourself to be?


Decision Making

Generally speaking, when it comes to decision-making those with less knowledge about investing are more likely to use their advisor as the sole source of information. While the overwhelming majority of this group (88%) expect their advisors to supply critical information about their investment purchases, those reporting more knowledge, relative to the less knowledgeable group, are more likely to rely on the prospectus (37% vs. 20%), financial advice websites (29% vs. 19%) and newspapers (26% vs. 15%).

Nonetheless, overall most respondents indicate a willingness to seek out their advisor to some degree when making a decision. Three-quarters (74%) indicate that they want to receive information from their advisor before they make their investment purchase. Of these individuals, slightly more than three-quarters (78%) say that they would postpone their decision until the information sought is provided.

Two-in-ten respondents (21%) indicate that they are not concerned about when they receive the information, so long as they know where they can access it. Moreover, slightly more than three-quarters (78%) say that they would postpone their decision until this information is provided.

41

Q. 13. From what sources would you expect to get this critical information?Base: Total sample

122Other

-11On line chat rooms

192926Financial advice websites

152623Newspapers

6109Magazines

8109Regulatory Organizations

244034Annual reports

37

87

35

%

653


Investing knowledge

20

91

40

%

347


Total Sample

1000n=

%

31Prospectus/offering documents for the investment

88

37

Financial/investment advisor/broker

Friends/family

Sources from whom respondents expect to receive critical information compared between self-reported knowledge groups.


Decision Making

43

When respondents want to receive information from their advisor.

Total Sample

n= 1000

%

At the same time as your advisor makes their recommendation.

After your advisor makes their recommendation, but before you make your decision to buy.

After you make your decision to buy is fine, as long as you get the information within the cancellation period

As long as you know where to access the information if you want and need it, that’s fine.

40

34

4

21

0% 20% 40% 60% 80% 100%

Q. 14. When would you want to receive this investment information?Base: Total sample


Decision Making

44

Likelihood of postponing the decision until the information is available (asked only of those who want information after / at the same time an advisor makes a recommendation, but before a decision.)

Q. 15. If the information is not available would you be willing to postpone your purchase until the information is available?Base: Among those who want information after their advisor makes a recommendation, but before making a decision (n=340)Q. 15b. If the information is not available would you be willing to postpone your purchase until the information is available?Base: Among those who want information at the same time an advisor makes a recommendation (n=404)

Q15a and Q15b combined“Respondents who wanted information at the same time an advisor makes a

recommendation and respondents who wanted information after their advisor makes a recommendation but before making a decision.”

n= 744

%

Yes 78

No 3

Don’t Know/Not Sure 19

Note: Results are based on supplemental questions fed from Q14. Please see the “Bases” at the bottom of this slide for information about who was askedthis question.

Those who were not asked this question were skipped to Question 16.


Decision Making

E. In retrospect: Evaluating whether the Information Respondents Received was Correct The vast majority of respondents (84%) believe that they were provided with the right information to make their investment decision. Only 5% report that the information they received was not right.

However, perhaps indicative of a desire to be educated, those reporting less investing knowledge are far less likely than those reporting more knowledge to believe that the information they received was correct (68% vs. 93%). Many among the less knowledgeable group simply report that they don’t know if they had the “right information”.

38

25411Don’t Know/Not Sure

4

93

%

653


Investing knowledge

6

68

%

347


Total Sample

1000n=

%

5

84

No

Yes

Attitudes about whether respondents believe they had the right information to make the decision compared between self-reported knowledge groups.

Q. 11. Did you feel you had the right information to make your investment decision? Base: Total sample


Decision Making

It should further be noted that just over one-quarter (26%) of those who felt that the right information was missing did not identify which information was missing.

39

Critical information that was missing according to those who felt they were missing information.

Those who feel they were missing informationn= 159

%

My own research/understanding/lack of knowledge

Lack of information/lack of details

Protection/assurance/guarantees

Transparency/trust/risky factors/dishonesty

Uncertainty/fall in value/downturn of investments/economy

Options/alternatives

History/Long-term performance

Everything / A lot

Other

None/Did not request

Not stated

13

10

6

16

13

4

3

3

5

8

26

0% 20% 40% 60% 80% 100%Q. 12. What critical information was missing? Base: Those who felt that they were missing information (n=159)

Note: This is a supplemental, open-ended question asked only of those who reported in the previous question that critical information was missing. All other respondents did not answer this question and were sent directly to the question on slide 21 on this report.


IV. Quality and Quantity of Information about Investing


Quality and Quantity of Information about Investing

A. Channels of Information Most respondents (44%) would prefer to receive information from their advisor in person. However, one-quarter (26%) would prefer to receive it by mail and one-fifth (18%) would prefer to receive it by email. Only one-tenth (12%) are interested in receiving their information from a website, even when there is a notification that the information is available.

55

44

26

18

12

1

0% 20% 40% 60% 80% 100%

Where respondents would like to receive their information.

Q. 20. How do you most prefer to receive investment information? Base: Total sample

Total Sample

n= 1000

%

In person

By mail

By e-mail

Posted on a website, with a notification that is available

Other



B. Quantity of Information Seven-in-ten (73%) believe that they receive the right amount of information about investment products. Nonetheless, one-in-ten (11%) believe they receive too much information, while 16% believe that they receive too little.

Those reporting less knowledge are less likely to indicate that they are receiving the right amount of information (79% vs. 62%). Moreover, they are more likely to suggest that they receive too little information (24% vs. 12%).

52

Q. 18. In general, how would you rate the amount of information you receive about investment products?Base: Total sample

12

79

9

%

653


Investing knowledge

24

62

14

%

347


1000n=

%

16Too little information

73

11

The right amount of information

Too much information

How respondents would rate the amount of information they receive.



When probed specifically about the content of the information provided, respondents imply that they do not know very much about conflicts of interest. Nearly one-fifth (17%) indicate that they do not know how much information they are given about conflict of interests, or are not sure if this question applies to their situation. This suggests that many investors may simply have not thought about conflicts of interest, or may not be sure what this entails in relation to their investment advisor.

The majority believe that they get enough information about risks and potential returns associated with investments that they are deciding on (79%). The majority also indicates that they get enough information about fees charged on the investment, or whether there is a penalty if you sell it quickly or before maturity (65%). However, a minority (48%) thinks that when they make an investment decision, they get enough information about conflicts of interest that their advisor might have or the firm that their advisor works with.

57

1

1

1

79

48

65

19

35

30

1

17

4

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Too much Enough Not enough Not applicable

Quantity of information about risks/returns, conflict of interest and fees associated with the investment.

Q. 21. When you are making an investment decision, in general how much information are you given about…Base: Total Sample

%

n=

Total Sample

About the risks and potential returns associated with the investment

About any conflict of interest your advisor or the firm they work for has and how this conflict has

been resolved?

About the fees charged on the investment, or whether there is a penalty if you sell it quickly or

before maturity?



C. Quality of Information Overall, the majority of investors working with advisors (69%) believe that the information they receive about investing is easy to understand. Conversely, a total of one-third (31%) believe that it is not easy to understand the information received.

However, compared to those reporting more knowledge, those with less knowledge are substantially more likely to report that the information they receive is not easy to understand (56% vs. 18%). Clearly this suggests a significant comprehension issue existing for many investors with limited investing knowledge.

54

Q. 19. How easy is the information to understand?Base: Total sample

561831TOTAL Not easy

1215Not at all easy

441726Not too easy

69

13

82

%

653


Investing knowledge

42

2

44

%

347


1000n=

%

60Somewhat easy

9

69

Very easy

TOTAL Easy

Ease of understanding information about investing.



D. Information about Risk and Return All respondents believe that information about risk and return is very important or somewhat important. In fact, the vast majority (84%) recognize that it is very important compared to a small minority (16%) who believe it to be somewhat important.

Four-in-ten (40%) rely entirely on their advisor’s advice when assessing the risk of an investment, which again reaffirms the importance of the advisor for many, both self reported knowledgeable investors, and those with limited knowledge. Fully half (50%) reporting that they look at what kind of investment the product is, knowing that some products have higher risk than others.

Nonetheless, the following chart illustrates that slightly more than one-third (33%) assume that higher returns mean higher risk, and vice versa. This finding helps explain the asymmetry between expectations of risk and expectations of return discovered in the previous question.

59

84

16

0

0% 20% 40% 60% 80% 100%

Perceived importance of information about risk and return.

Q. 22. When making an investment, how important is information on risk and return? Base: Total sample

Total Sample

n= 1000

%

Very Important

Somewhat Important

Not Important



60

40

33

50

4

2

0% 20% 40% 60% 80% 100%

How respondents assess the risk of an investment.

Total Sample

n= 1000

%

I rely entirely on my advisor’s advice

I look at the potential returns and assume higher returns means higher risk, and vice versa

I look at the kind of investment product it is, knowing that some products have higher risk

than others and vice versa

I assume all investment products have equal risk

Other

Q. 23. How do you assess the risk of an investment? Base: Total sample



Finally, most respondents (71%) would prefer to receive information about risk and return from their advisor, which is indicative of a tendency to use advisors as an important source for this information. This proportion clearly overshadows those who would rather receive information from a regulatory body (16%) or from their advisor’s firm (12%).

61

71

12

16

2

0% 20% 40% 60% 80% 100%

Preferred sources of information about risk and return.

Q. 24. Where would you like to get information on an investments risk and return? Base: Total sample

Total Sample

n= 1000

%

Your advisor

The advisor’s firm

A regulatory body

Other sources


V. Demographics


Demographics

4

Gender

Total Sample

n= 1000

%

Male 49

Female 51


Demographics

5

Province

Total Sample

n= 1000

%

British Columbia 10

Alberta 9

Saskatchewan 5

Manitoba 6

Ontario 39

Quebec 24

New Brunswick 1

Nova Scotia 5

Prince Edward Island <1

Newfoundland and Labrador 1


Demographics

6

Age

Q. 93. Province/Territory Base:

Total Sample

n= 1000

%

18-24 6

25-29 11

30-34 17

35-39 9

40-44 11

45-49 14

50-54 16

55-59 7

60-64 6

65+ 5

Total Sample

n= 1000

%

<35 33

35-54 49

55-64 13

65+ 5


Demographics

7

How long have you been investing?

Q. 25. How long have you been investing? Base: Total sample

5

21

23

32

19

0% 20% 40% 60% 80% 100%

Total Sample

n= 1000

%

Less than a year

One to four years

Five to nine years

10 to 19 years

More than 20 years


Demographics

9

What is the approximate value of your investments?

50

22

16

8

4

0% 20% 40% 60% 80% 100%

Total Sample

n= 1000

%

Less than $50,000

Between $50,000 and $99,999

Between $100,000 and $249,000

Between $250,000 and $499,000

Over $500,000

Q. 27. What is the approximate value of your investments? Base: Total sample

Report on Retail Investor Information Survey

Documents

Transcript of Report on Retail Investor Information Survey