Vancouver - A survey conducted by the Canadian Securities Administrators (CSA) found that changes in the economy (38 per cent) and advice from a financial adviser (36 per cent) are the top two reasons why investors who normally do not review their risk tolerance did so in the last year. Another 17 per cent reviewed their risk tolerance because of a major life change. There was a marked increase in those who said they reviewed their level of risk tolerance in the last year, with 61 per cent reporting they did so - up from the 49 per cent in 2012.
The results are from the 2016 CSA Investor Education Study, the fourth survey on investment knowledge, investor behaviour and incidence of investment fraud among Canadians. Previous surveys were conducted in 2006, 2009 and 2012. The 2016 study also included new questions around barriers to informed investing behaviour and access to investing information.
The survey revealed that there has been a steady increase since 2006 in the percentage of Canadians working with a financial adviser, from 43 per cent in 2006 up to 56 per cent this year. In addition, when it comes to researching investments, most investors rely primarily on their adviser for information. Seven-in-ten investors used their investment adviser as a source when they last looked for investing information, higher than any other information source. Other sources of investing information included media outlets (27 per cent), bank or financial institution's website (26 per cent), and family and friends (26 per cent).
"With more Canadians relying on investment advisers, it is critical that advisers regularly review information with their clients, including risk tolerance, to be certain that their clients' investments make sense for their current situation and future goals," says Louis Morisset, Chair of the CSA and President and CEO of the Autorité des marchés financiers.
Survey respondents view their local securities regulator as one of the most reliable sources of information about investing, with financial advisers and a bank or financial institution's website rounding out the top three reliable sources.
Beyond these major changes, the survey found a number of more stable areas compared to previous surveys:
- Investor knowledge has been steady over time. In both the new 2016 study and in the 2012 survey, six-out-of-10 Canadians could correctly answer a majority of seven questions measuring investment knowledge.
- Awareness of provincial securities regulators changed marginally, up three points to 42 per cent this year compared to 39 per cent in 2012.
- About one-in-five Canadians, 22 per cent, say they have been approached with a suspected fraudulent investment. This is down slightly from 27 per cent in 2012.
- Of those approached, just 30 per cent say that they reported the most recent attempt. This is steady since 2012, in which 29 per cent said the same.
The new areas of research in the 2016 Investor Education Study explored barriers to good investment behaviour and found, among other things, that:
- Despite the steady increase in Canadians working with advisers, three-out-of-five investors did not check their adviser's registration.
- Common barriers to checking an adviser's registration are "I don't know how to check an adviser's registration" and that "I don't need to check an adviser's registration if they work for a major financial institution."
- However, most Canadians are interested in checking registration if they knew how. Canadians do believe checking registration is worthwhile as 69 per cent disagreed with the statement that "checking an adviser's registration is more trouble than it's worth."
- Most Canadians, 78 per cent, said they would likely check a new adviser's registration if they started working with one in the future.
For the 2016 CSA Investor Education Study, Innovative Research Group interviewed 4,298 Canadian adults online between February 10 and 20, 2016. Canadians were interviewed in both English and French. The online sample was weighted by age, gender, and province and territory using 2011 Statistics Canada Census data to reflect the actual demographic composition of the population.
The 2016 CSA Investor Education Study Key Highlights Report is available online in both English and French on the CSA website. The key findings are also available on CSA member websites.
The CSA has developed tools to help investors check registration and avoid investment fraud. These resources are available in the Investor Tools section of the CSA website and investors are encouraged to visit the site to learn more about making informed investing decisions.
The CSA, the council of securities regulators of Canada's provinces and territories, coordinates and harmonizes regulation for the Canadian capital markets. Their mandate is to protect investors from unfair or fraudulent practices through regulation of the securities industry. Part of this protection is educating investors about the risk, responsibilities and rewards of investing.
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Jason (Jay) Booth