Despite Canada’s wealth management industry promoting a goals-based approach to advice, nearly half of full service Canadian investors think that their advisors fail to deliver on even the first stage of that process, according to the J.D. Power 2016 Canadian Full Service Investor Satisfaction Study.
Of the investors surveyed, 54% cited that their advisors helped them set goals and discussed risk.
Only 34% of the investors said that their advisors effectively supported them on setting goals, implementing a strategy to achieve those goals, and monitoring progress.
J.D. Power director of the wealth management practice Mike Foy said: “These results don’t speak well for the industry as a whole. Investors have some newer, more compelling lower-cost alternatives available to them, including robo-advisor.
“In addition, with CRM2-mandated fee disclosures beginning to roll out, many investors will be learning for the first time exactly what they have been paying for. Advisors who aren’t adding value for their clients beyond asset allocation may be in real trouble.”
The study revealed that in spite of the focus on fee transparency with CRM2, only 27% of investors completely understand their fees, a decline from 30% in 2012.
Also, 30% of the investors said that they are interested in the emerging trend of robo-advisors.
The study further highlighted that 42% of investors in the millennial segment want to play a more active role in the management of their wealth compared to previous generations, but have access to an advisor for guidance.
This is in contrast to older generations such as boomers who defer to their advisor’s judgments and decisions.
“Wealth management firms and advisors must be cognizant of the increasing prevalence of the validator investor mindset and the challenges it presents. It doesn’t necessarily mean advisors become less important, but the role they play for investors may be different. They can’t just manage portfolios—the best advisors of the future will need to be part coach, part teacher and part financial therapist,” Foy added.