Monday, October 6, 2014

IFIC funded study points the way to reform-our Observations

IFIC sponsored a Study by  The Conference Board of Canada (CB0C) Boosting Retirement Readiness and the Economy Through Financial Advice CBoC is recognized as a professional research house with the highest level of intellectual integrity.. CBoC openly acknowledge that “advisors” do not produce enough extra returns to cover their fees . CBoC argue that the real benefit of having an advisor may not be investment advice at all. It may have more to do with engendering beneficial savings behaviour among clients. They concluded that if more people used investment advisors, they would save more money, and the country would benefit over the long term .As is well known ,“advisors” seek out clients who already have significant investable savings and tend to drop clients who fail to invest enough money over time because these clients don’t generate enough fees .If one reads between the lines, CBoC is saying that account underperformance is significant and the main benefit of advice is an increase in savings rate i.e. a babysitting role. This implies that if lower cost products were recommended , better returns would be obtained AND even more savings would accrue. However, the current Canadian business model where “advisors” sell more expensive ,underperforming actively-managed mutual funds leads to high costs and minimal unbiased advice. This supports a reformed business model where investors pay advisors' separately for tailored advice rather than having the mutual fund company pay for the advice contingent on selling their product..This way ,investors can feel more assured that the recommendations made are in their best interests and if not, they can engage another advisor or become a DIYrs if they feel they are sufficiently competent to control their own financial destiny. This will lead to increasing the number of professional advisors and enhanced financial outcomes for over 10 million Canadians. IFIC deserve credit for engaging CBoC and letting the chips fall where they may.Read our Observations 

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