Steven Lamb / January 24, 2011
A large number of Canadian investors appear oblivious to the costs associated with their mutual funds, according to a survey commissioned by ING DIRECT. The poll found that 45% of Canadians were unsure about the annual management expense they are pay on mutual funds.
It should be noted, of course, that ING is a purveyor of mutual funds made up of ETFs and offers no financial planning services in conjunction with these offerings.
“It’s concerning that Canadians are unaware of the high fees they pay for mutual funds, especially since these are the most popular investments in most retirement portfolios,” said Peter Aceto, president and CEO, ING DIRECT Canada. “These high fees coupled with the typical performance of an actively managed mutual fund verses the benchmark index means many Canadians’ retirement portfolios are being shortchanged.”
The survey also found that 58% said choosing a mutual fund for their RRSP was not as simple and straightforward as it could be, and 36% were frustrated by the process of choosing their own.
Not surprisingly, the discount bank suggests its streamlined collection of ETF-based mutual funds is one way of avoiding the stresses of investing.
To be sure, limiting one’s investment universe to three options is a great stride toward simplification, but if 45% of investors are too disengaged from the process to look into the fees associated with their investments, they are probably too disengaged to be pursuing a do-it-yourself investment strategy.
Engaging a financial advisor to guide investment decisions and explain the costs associated with those decisions is probably a preferable route. The survey also found that 28% of respondents were unable to suggest what they considered to be a fair fee on their mutual funds.
Understanding what services are paid by mutual fund fees is the key to determining what is fair, so walking a client through their costs and your services should lay to rest any perception that mutual fund fees are too high, at least for the advised investor.