Stop ducking your investment statements
Whether it’s out of dread or complacency, a lot of investors aren’t reading their account statements.
That’s the conclusion to be drawn from a J.D. Power survey in which investors were asked if they noticed any change during the past year in how fees and performance information was communicated by their advisory firm.
Just 23 per cent noticed a change, a strikingly low number in light of the fact that new regulatory transparency rules have added some key data to client statements.
Over all, the number of investors reporting a complete understanding of fees was 24 per cent, down from 27 per cent in 2016.
On an annual basis, investment firms must now show personalized returns and, in dollar terms, the fees investors pay for advice and other services. The rules started to take effect last summer and most firms will have complied by now. In other words, the presentation of fee and performance information has definitely changed – for the better.
A certain obliviousness is not necessarily a bad thing as an investor. A well-structured portfolio doesn’t need frequent tending. But not reading account statements is taking this set-it-and-forget-it attitude too far. Even a glance at your statements should be enough for you to notice the newly enhanced fee and performance data being provided.
The J.D. Power study suggests many advisers are dropping the ball as well. Slightly more than one-third of the 4,903 investors who participated in the study said their adviser didn’t clearly communicate reasons for the performance of their investments, and 41 per said their adviser did not explain fees. Shockingly, of the investors who said they were aware of the new disclosure requirements and did talk to their adviser about fees, just 35 per cent said they fully understood their cost of investing.
The survey results suggest everyone needs to work harder to make fees more comprehensible – investors, advisers and the regulators who are behind the new disclosure requirements. It’s possible that some fine-tuning is necessary to make the new information more digestible. Investors can do their part by opening their statements and giving them at least a quick look for pertinent information beyond the amount their account is up or down. The J.D. Power study was done as part of the firm’s annual customer-satisfaction ranking of full-service investment firms. Edward Jones took the top spot for 2017 with a score of five out of five. Assante Wealth Management, ATB Financial, Raymond James, HollisWealth, Credential Securities and National Bank Financial received a score of four, while the other firms in the ranking scored threes and twos.
The average score was three.
Edited on 9 November 2017