One of my goals with my blog this year is to invite guest experts from our business to share insights on their area of expertise, and what ING DIRECT is doing to help change the conversation around money in Canada. My first guest blogger is Silvio Stroescu who leads our mutual fund team. Silvio and his team are particularly busy at this time of year, RSP season, helping to coach and educate clients about mutual funds. Did you know that mutual funds are the most popular investment for RSPs? How much do you know about the mutual funds in your portfolio?
Raise your hand if you wake up in the morning thinking about which mutual fund to buy. It’s not something that’s on most people’s radars, yet close to two-thirds of Canadians invest in mutual funds as part of their retirement portfolios. The reason most of us end up investing in mutual funds is because they are sold to us.
We don’t buy mutual funds with the same level of consumer vigilance we show when buying our cars or our homes. This is alarming when you consider that these investment buying decisions have an enormous impact on our quality of life right when we need it the most.
We are not experts in every aspect of our lives, which is why we visit mechanics, see doctors or call a plumber. With over 6,500 mutual funds available, picking the right mix for our portfolio seems to be about as easy as picking a winning lottery ticket. So, it’s no surprise that Canadians tend to outsource the mutual fund buying decision to an “advisor”.
The challenge is that most advisors we depend on to help us make investment decisions are salespeople caught in a glaring conflict of interest. They are compensated by fund companies based on the mutual funds they sell. Mutual funds with higher compensation for the salespeople translate to higher fees for us as investors and inflict a burden on our retirement goals.
There are plenty of straightforward and cost-effective investment options to satisfy our retirement portfolio needs and we don’t need to be financial experts to understand them or buy them. To ensure we take the advice that is right for us as investors, we just need to be more engaged in our investment buying decisions and be aware of the options available to us.
For many people, investing the time today to understand the value they are receiving from their advisors, and investments could allow them to retire a few years earlier (see chart 6). Make sure you know exactly how much you pay your advisor, and for your mutual funds, on an annual basis. Do you feel the cost is justified based on the advice and other financial planning (i.e. estate or tax planning) you are receiving, and the return of your investments? You don’t need to be a financial expert to answer these questions. But what you uncover will make you a more educated and engaged investor, which we can guarantee is in your best interest.

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