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Only half of B.C. investors know what they’re paying in fees: study

According to a ground-breaking new study by the British Columbia Securities Commission (BCSC), 51 percent of investors in British Columbia know how much they’re paying in fees for the investments they buy, sell or hold in their portfolios.
BCSC
Even a 1 percent difference in fees can add up over time. Photo by KMR Photography

According to a ground-breaking new study by the British Columbia Securities Commission (BCSC), 51 percent of investors in British Columbia know how much they’re paying in fees for the investments they buy, sell or hold in their portfolios.

While this might not seem like cause for alarm, even a difference of 1 per cent on a 20-year investment of $20,000 could add up to $6,403 in savings.

Pamela McDonald, BCSC Director of Communications & Education, hopes the insights from the study will motivate investors to take a closer look at their investment reports.

“We want people to know what fees they pay and talk to their investment advisors about the choices they have when it comes to their investments,” says McDonald. “The more investors know about their investments, and the more they communicate with their advisors, the better they can do over the long term."

Between now and July 2017, B.C. investors will be receiving more detailed information than ever before about the fees they are paying. Under new securities regulations, investment advisory firms are now responsible for disclosing both the direct and the indirect fees their clients pay each year.

Other key findings from the BCSC study reveal that most investors with smaller portfolios (under $50,000) do not know how their investment advisor is paid. They’re also less familiar with the variety and different types of investment fees.

Age is also a factor when it comes to investors’ knowledge about their fees. The study found that investors under 35 have a better understanding of fees and are more involved with their investments. However, younger investors are the most likely to believe that a 1 per cent fee increase will not have much impact on their long-term investment returns.

McDonald points out, "Our research shows that many investors are not asking important questions about their investments, such as what fees they pay to their advisor and how their investments are performing."

She adds, "The new disclosure requirements will ensure that investors receive that information and are empowered to discuss fees and performance with their advisors."

The new fee report that investors will receive from their advisors includes information such as the charges associated with the operation of their accounts as well as compensation the advisor receives through third parties.

With more information available to B.C. investors than ever before, now is the time to make a habit of reviewing the statements and reports provided by your investment advisor.  

“Ultimately, we see more informed investors making better investment decisions thanks to increased transparency about their investment fees. No other country in the world has taken this step to mandate such comprehensive fee transparency,” McDonald says.

Every investor should be familiar with the variety of fees they are exposed to. From management fees to trailing commissions, the BCSC provides an overview of the charges and fees that could be applied. You can learn more here.