By Tom Bradley

I’m hearing rumblings that the investment industry is going to fight back on some of the new regulations that the Canadian Securities Administrators (CSA) are proposing around performance and fee disclosure.

Last week’s full page ad in the National Post by the Investment Industry Association of Canada (IIAC) may be evidence of this. The ad summarized an IIAC-sponsored survey that provided evidence that Canadian investors highly value their investment advisors. It stated:

  • 77% say their advisor adds value above and beyond market performance
  • 63% say they receive high value relative to fees paid
  • 86% feel confident they will reach their goals
  • 86% say the advice from their advisor is important or critical to reaching their most important financial goals
  • 84% have a high level of trust in their primary advisor

There are a number of reasons why we should take this survey with a huge grain of salt - the sponsor being one and the survey company another (Advisor Impact is a company that helps financial advisers and accountants maximise their profitability and productivity; it works with advisers in the UK, U.S. and Canada). But what really makes the findings meaningless, and perhaps dangerous (if it slows down regulatory reform or encourages investors to blindly trust their advisors) is the likelihood that a large portion of the 1,018 investors surveyed don’t know how they’re doing or have no idea what they’re actually paying their advisors.

The state of client reporting for a vast majority of the industry players is appalling. Indeed, the CSA initiative to improve disclosure around mutual fund fees and performance reporting (the very initiatives that have everyone stirred up) is a result of surveys done by the Ontario Securities Commission that reveal just how little most investors know.

If the industry is going to launch a public campaign to slow down the CSA, it better come up with some better material. Before we put any faith in surveys like the IIAC one, we need to be confident that investors truly understand what they’re paying and how they’re doing.