Special to the Financial Independence Hub
As Canadians turn their attention to their investments during this COVID-influenced RRSP season, an annual online study conducted for Questrade by Leger (www.leger360.com) last month unveiled some compelling findings regarding trends and changes Canadians are likely to make when investing.
As part of our ongoing commitment to improving the financial security of Canadians, we set out to learn about what issues are currently top of mind, how they might impact investing, and what we can do to help investors on their journey to financial security. To no surprise, most respondents chose money, health, and family as their top three worries. We also saw some interesting behavioural trends to note.
Despite the pandemic, our research showed that Canadians continue to be very committed to making contributions to their retirement savings, while evidence suggests investors are placing importance on ensuring their investments go farther.
Most will contribute as much or more this year
A majority (69%) of respondents with an existing RRSP plan to contribute the same amount as last year (or more) to their RRSP this year, showing an unwavering commitment to their retirement. The number is even higher amongst those with a TFSA, with 85% planning to contribute more or the same amount to their TFSA. Half (50%) said given the impact and uncertainty during this pandemic, they are more likely to invest for the long term or for retirement, while 44% are actively seeking lower fee options this year, and 39% are investing more this year to get better returns.
These findings may reflect the current low interest rate environment that we’re experiencing. What is important is that our research showed continuing concern — and outright lack of knowledge — regarding fees, mutual funds, and the option of ETFs, strongly indicating the need for continuing education and awareness.
Awareness of ETFs is still low
Our poll also reflected that awareness of ETFs as a viable investment option remains low, even though ETFs typically have much lower fees, and that money invested in ETFs has risen quickly and begun to replace traditional investments in mutual funds. Not surprisingly, more than half (51%) agreed that a 2% fee for a mutual fund is high — while an additional 38% said they did not know. Shockingly, almost 1 in 2 of those who invest in mutual funds admitted they do not know what fees they pay for their mutual funds.
Twenty-one per cent said they were more open to investing in ETFs. Why? 11% said ETFs have lower fees so they can keep more of their money, while nine per cent stated they have heard about ETFs recently and want to try investing and seeing how they perform. Six per cent believe ETFs are the new, better way of investing. Less than half (42%) were not yet open to investing in ETFs – with a majority stating their main reason was they are not familiar with what an ETF is. An additional 37% said they “do not know” if they are more open to ETFs.
Majority more likely to invest online this year
When asked about online investing, 51% of those polled stated they were more likely to invest online this year, as opposed to physically going into a branch. Clearly, a sign of the times. Twenty-two per cent said they are likely to switch to an online investment provider versus a bank, twice as likely for those aged under 35 years. Why? Forty-eight per cent said they do everything else online, so why not invest online as well? Thirty-four per cent said they need to make a better return on their money. Twenty-four per cent said they have more time on their hands now to do it themselves, and 20% were more comfortable because friends and family were already investing online.
It is likely we’ll see a much more pronounced shift to online investor behaviour this year, as indicated both by our research and by recent market activity. What remains important is that investors are aware of their options and the factors that impact their retirement in the long term, before making RRSP and TFSA contributions. At Questrade, we remain committed to helping Canadians keep more of their money for retirement while securing their financial future. To learn more about lower fee alternatives, we invite all Canadians to visit www.Questrade.com.
Scarlett Swain joined Questrade in 2018 and is the director of investment products at Questrade Financial Group. She is responsible for the product roadmap for investing products and heads up Questrade’s CRM team. With 20 years of experience in the financial sector, she has spent the last three years leading her team to develop innovative tools and platform enhancements to keep Questrade’s trading experience leading edge and help maintain the firm’s rank as Canada’s fastest growing brokerage, by Investor Economics.