B.C. investors often focus on maximizing their nest egg, but more of them need to pay attention to what it costs to maintain their investments, according to a new report.
The report, “Investor Readiness for Better Investing,” reveals that only 51 percent of B.C. investors know the amount of direct fees paid to their advisors over the last 12 months. A third have no knowledge about how much they pay their advisor overall.
As a result, these investors may be missing an important opportunity to build a stronger relationship with their investment advisors by asking about the fees they pay and how they will impact their investment goals.
The statistics come from a study by the British Columbia Securities Commission (BCSC) that highlights where B.C. investors’ knowledge falls short with respect to their investment fees.
"Our research shows that many investors are not asking important questions about their investments, such as what fees they pay to their advisor and how their investments are performing," says Pamela McDonald, BCSC Director of Communications & Education.
She continues, "The new disclosure requirements will ensure that investors receive that information and, we hope, empower them to discuss fees and performance with their advisors."
The initial findings of the BCSC report uncover low investor awareness of fees related to the investments they own. Key findings emphasize that investors and their advisors alike have a role to play when it comes to investing, and that the more they communicate, the better the investment income is likely to be.
“We want people to know what fees they pay and to talk to their investment advisors about the choices they have when it comes to their investments,” says McDonald. “The more investors know about their investments, and the more they communicate with their advisors, the better they can do over the long term."
Further findings in the study demonstrate how communication between investors and advisors appears to be linked to this knowledge deficit. The report notes that investors with smaller portfolios (under $50,000) are “less informed, less satisfied and less likely to communicate with their advisors.”
Another key takeaway shows how young investors (under the age of 35) are more involved with their investments, and yet tend to be less aware of the impact an increase in fees can have on their rate of return. In fact, on a $20,000 investment over 20 years, the difference between paying 2% and 3% in fees could total $6,403.
The BCSC hopes this new information will provide B.C. investors with data they need to make better decisions about their portfolios and will also make them more aware of their options.
“Ultimately, we see more informed investors making better investment decisions thanks to increased transparency about their investment fees. No other country in the world has taken this step to mandate such comprehensive fee transparency,” concludes McDonald.
