February 22, 2016
Recent BCSC study shows trust in an advisor may keep investors from due diligence
Vancouver – This RRSP season, the British Columbia Securities Commission (BCSC) is encouraging investors to make smarter decisions and learn more about the role they play when working with an investment advisor. The BCSC’s message is prompted by findings from research it commissioned showing that while most British Columbians agree they have responsibilities when it comes to investing, many neglect those responsibilities. According to the study, 43 per cent of British Columbians 35 years and older have investments, and 27 per cent of them invest through an advisor.
The National Smarter Investor Study, released by the BCSC late last year, paints a contradictory picture of investor attitudes and behaviours in the province. While 49 per cent of respondents felt researching investments recommended by their advisor was their responsibility, only 22 per cent said they actually did their research. And while 74 per cent believed they were responsible for reading their statements, only 62 per cent always read them.
“We’re encouraged to see how many investors acknowledge their responsibilities, but we need to bridge the gap between what people know they should do and what they actually do,” said Pamela McDonald, Director, Communications and Education, BCSC. “RRSP season is the perfect time of year to remind investors of their responsibilities, because investing is top of mind.”
The Smarter Investor Study BC Report released today shows that behaviours also vary regionally throughout the province. Respondents from Vancouver, Richmond, the North Shore, and Lower Mainland suburbs were the least likely to consistently do the right things when considering an investment, such as referring to a financial plan or waiting a day before investing their money. Residents from Vancouver Island were the most likely to exercise proper investment behaviour.
Another key finding from the BC Report was the role trust plays in the client-advisor relationship: 90 per cent of respondents reported a strong level of trust in their advisor, which may help explain some of the behaviour gaps. For example:
- 63 per cent of BC investors who reported they do not always read their statements, said it was because they trust their advisor is taking care of their money.
- Over one third of all respondents in BC said they did not need to understand the risks and benefits involved in their investments, because they trust their advisor to.
“Trust in an advisor is not enough to ensure future financial health,” said McDonald. “To make the most of their investments, investors need to actively involve themselves in their relationship with their advisor and the decisions they make.”
To help British Columbians become smarter investors and make the most of their RRSP contributions, the BCSC recommends the following steps:
- Ask your advisor about fees and how he or she is compensated. Fees are a fact of investing, but they do have an impact on investment returns.
- Check your advisor’s registration to ensure he or she is licensed to sell you a recommended investment. Find out more about checking registration here.
- Research investments recommended by your advisor so that you fully understand what you are putting your money into.
- Understand the degree of risk you are willing to take and how much you can afford to lose. The BCSC has an online risk test to help you understand your personal risk tolerance here.
The National Smarter Investor Study was released by the BCSC in November 2015. For more information on the National Smarter Investor Study: BC Report, visit BCSC InvestRight here.
About the British Columbia Securities Commission (www.bcsc.bc.ca)
The British Columbia Securities Commission is the independent provincial government agency responsible for regulating capital markets in British Columbia through the administration of the Securities Act. Our mission is to protect and promote the public interest by fostering:
- A securities market that is fair and warrants public confidence
- A dynamic and competitive securities industry that provides investment opportunities and access to capital
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For more information:
BCSC Media Relations
BCSC public inquiries:
604-899-6854 or 1-800-373-6393 (toll free)
Grace Hon (Vancouver)