Skip Ribbon Commands
Skip to main content
Print Print
Text Size A A A

Investor behaviour and beliefs: Advisor relationships and investor decision-making

Investment definition
Research reveals Canadian investors’ trust in their financial advisors and confusion about the terms of their relationships

 Download the full study.

 

Toronto, ON, March 01, 2012 - Advisors are the key influence on investors’ decision-making is a major finding of this study that also highlights investors’ knowledge and expectations regarding their advisory relationships. The research was undertaken to understand more about the expectations and learning needs of investors who have an advisory relationship. The research looked at several facets of the client-advisor relationship, including:

  1. How advisor relationships are formed and maintained;
  2. The products people buy, as well as other products they believe they can buy;
  3. Which services advisors are expected to provide;
  4. Types of advice sought and received;
  5. Fiduciary duty in the advisor relationship;
  6. Working with advisors to make investment decisions;
  7. Reliance on advisor advice versus other information;
  8. Major influences on investment decisions; and
  9. The role of fees and their disclosure in investor decision-making.

Key findings on advisor relationships:

  • Investors most often work with an advisor that their financial institution has assigned to them, rather than an advisor they have sought out based on specific needs.
  • Investors don’t understand or consider different types of advisor registration and licensing.
  • Services that people expect from their advisor, including planning and asset mix advice and advice on dealing with life events, are clear.
  • When discussing investment choices, advisors typically present multiple options and make their selection criteria clear.
  • Most clients believe the advisor has a legal duty to put their interest ahead of his or her own.

Key findings on investor decision-making:

  • The advisor’s opinion dominates all other sources as a factor in buying decisions. Opinions of friends and family members are somewhat influential, as are independent print materials. Online sources are particularly influential with younger investors.
  • Performance and portfolio mix are the most critical factors for selecting investments. Risk of losing money is more likely to drive a decision "not to buy".
  • Knowledge of mutual fund fees and what affects them is minimal. Their complexity makes it difficult for investors to assess potential conflict of interest.
  • Disclosure of fees is inconsistent. When fees are disclosed, investors want disclosure in both dollars and percentages.

 

Related resources

Rob Carrick: Questions to ask before selecting an investment adviser
5 steps to assess your adviser
The Cranial Cash Clash: Concise advice