Mutual Fund Industry Sales Practices Study

Canadians tired of high fees, lack of transparency in investment industry, survey finds
Sep 8, 2005 - Canada Newswire
Investors seeking low fees, transparent pricing, unbiased advisors
TORONTO, Sept. 8 /CNW/ - Canadian investors believe they are paying too much in fees to those who manage their money, and many find the complex fee structures of the investment industry confusing, according to a new survey by Decima Research.
The survey, commissioned by Stratos Wealth Management (Stratos), a division of MD Management Limited, reveals a troubling picture of frustration and dissatisfaction among Canadian investors when it comes to understanding and receiving value for the fees they pay for investment products and services. Stratos is a new business venture from the MD Financial Group, one of Canada's largest independent financial services organizations.
The survey also reveals that while many feel the investment industry lacks clarity and transparency in disclosing the fees investors pay, many have little or no idea what they pay - leaving a large proportion of investors in the dark when it comes to their personal financial management.
"It's clear that investors are dissatisfied with the fees they pay - and those who aren't should be, given the negative effect high fees have on investment returns," says Sandy Wilson, chief operating officer for CMA Holdings, the parent company of both MD Management and Stratos Wealth Management. "Canadians are looking for clear, competitive and transparent pricing - with no hidden fees."
Here are some key findings of the survey:
Investors tired of high fees, low transparency
- 48% of Canadian investors believe they are paying too much in fees, compared with just 40% who are comfortable with the fees they pay. A further 12% don't know one way or the other. Of those who offered an opinion, therefore, 55% believe they are paying too much.
- A surprising number of investors - 43% - believe that the investment industry lacks clarity and transparency in disclosing the fees investors pay.
Investors in the dark
- It seems that the information provided by investment firms is not doing the job. 44% have only "a vague idea" or "no idea" of the fees they pay on the management, purchase and sale of investments by their fund managers, securities dealers or investment advisors.
- Of those who do know what they are paying, 43% report paying 3% or more of their total investment portfolio in fees. Of that number, an incredible 6% claim they pay more than 10% in fees. This contrasts with data from Investor Economics, which show that, on average, Canadians pay between 2.2% and 2.8% of their portfolios in fees(x).
- Individual financial advisors seem to get a passing grade: 67% agree that their advisor or investment company has taken the time to provide information on fees. Still, almost one-third (31%) disagree, notwithstanding regulatory efforts to improve disclosure of fees.
Stratos Wealth Management is modeled on its highly successful parent company, MD Management Limited, part of the MD Financial Group, which manages more than $19 billion in assets. The company plans to leverage this experience by providing wealth management to all busy professionals seeking more customized, comprehensive and cost-effective services.
Stratos is based on a simple idea: offering quality investment products and ongoing financial advice and service - all for a low fee. The new company offers one other point of differentiation: its unbiased financial advisors are measured and rewarded based on client satisfaction - not sales commissions.
About the survey
This telephone survey was conducted with 376 Canadian investors between the ages of 25 and 64 between August 18 and August 21, 2005. It was conducted by Decima Research Inc., on behalf of Stratos Wealth Management. Results to the survey can be considered accurate to within plus or minus 3.1 percent, 19 times out of 20.
About Stratos Wealth Management (www.stratoswealth.com)
Based in Toronto, Stratos Wealth Management is a division of MD Management Limited, one of Canada's largest and most respected independent investment companies. With more than $19 billion in assets under management, MD Management has been serving members of the Canadian medical profession and their families for more than 35 years.
About MD Financial Group
MD Financial Group(TM), refers to various CMA Holdings Incorporated companies offering financial planning through MD Management Limited, mutual funds by MD Funds Management Inc. and MD Private Trust Company, discretionary investment counselling and portfolio management services through MD Private Investment Management Inc., executor and trustee services through MD Private Trust Company, banking referral services in collaboration and through National Bank and insurance products by MD Life Insurance Company and Lancet Insurance Agency Limited.
(x) For Canadian industry wrap products, "The Fee-Based Report," Investor Economics, Winter 2005, p. 87.