If you're a regular reader of Wealth Matters, you know how Canada ranks in the world when it comes to its investment industry.
Maybe it's no surprise, but Canadians are getting the short end of the stick. Canadians pay the highest fees in the world to invest their own money with the average equity mutual fund charging 2.42 per cent per year. And, a recent study found that many of the funds they're paying for, even the ones that advertise themselves as great stock-picking funds, are really just index funds in disguise. Almost 40 per cent of assets in equity mutual funds sold in Canada are in closet indexers - as reported by The Globe and Mail. Calling a fund a stock-picker so that you can charge more for it, when underneath it's really an inexpensive index fund, is a problem.
That's my number one wish for the investment industry in Canada in 2016:
1. Start treating Canadians with respect. Enough with the high fees and deceptive advertising.
Here are a few other wishes:
2. Be more inclusive of women. The investment business is still geared towards male investors. We had a great talk with economist Sherry Cooper last year about women and finance, and I believe many of us are on the right track, but more needs to be done.
3. More realization on the part of Canadian investors that they need to be the market, not try to beat it. Decades of evidence has shown us that over time, you get higher returns from low-fee index funds.
4. Less focus on accumulation, and more on meeting your goals. The popularity of my columns on career choices and balancing your needs with those of your kids tells me that Canadians are seeking happiness in their careers and personal lives, not necessarily more money. We in the investment business need to do a great job helping people recognize what’s important to them, and then helping them get there. This industry has been about the financial companies for way too long. It’s time we in this industry all realized your savings are about you.
Thanks for reading in 2015, my first year of writing Wealth Matters. If there's a personal finance topic you'd like to see demystified, send me an email at firstname.lastname@example.org.