Ms Pamela McDonald reports

BCSC STUDY FINDS MILLENNIALS UNDERSTAND INVESTMENT FEES BETTER UNDER CRM2, BUT ARE THE LEAST LOYAL OF INVESTORS WHEN IT COMES TO ADVISOR RELATIONSHIPS

A four-part, longitudinal study commissioned by the British Columbia Securities Commission (BCSC) shows that millennials' general understanding of investment fees grew as a result of charges and compensation reports required under securities rules known as the Client Relationship Model, Phase 2 (CRM2). But millennials were also the most likely of all generations to change their advisers or firms during the study period.

Young people in British Columbia between the ages of 18 and 34 were more likely than older generations to recall both their 2017 and 2018 fee reports over the course of the 16-month study (62 per cent did so, compared with 53 per cent of those over 35). The study showed that 76 per cent of male millennials and 74 per cent of female millennials agreed the CRM2 fee disclosure reports provide information they need to better understand the fees they pay for the investments they hold. After receiving their 2018 CRM2 reports, male millennials were by far the most likely (60 per cent compared with 31 per cent over all) to report they discussed the fee report with their investment advisers.

Millennials' general understanding of investment fees has improved since the first CRM2 fee disclosure reports were sent out in 2016. Half of all millennials in the study (49 per cent) saw some long-term improvement in their general understanding of investment fees.

"Like baby boomers, millennials represent a large demographic that can influence the world economy. As millennials begin to make more money and think about investing it, we want them to be knowledgeable and, therefore, empowered to make good investment decisions that will set them up to have good investment outcomes," said Pamela McDonald, director of communications at the BCSC.

Since the first part of the study, millennials have shown they are more likely than other generations to make changes to how they invest. Although they were no more likely than other age groups to take any new actions after receiving the fee reports, those millennials who did act were more likely than older generations to change their advisers or firms. Twenty-eight per cent of millennials changed their advisers or firms during the study period, compared with 20 per cent of those between the ages of 35 and 54 and only 7 per cent of those above 55.

"Millennials, like all investors, have choices when it comes to their investments," said Ms. McDonald. "This longitudinal study shows that they are using their CRM2 reports to inform those choices."

The BCSC has tools to help millennial investors improve their investment fee knowledge, such as a fee calculator, on the "Take a Look at Your Investment Fees" page on the Invest Right website.

The BCSC commissioned the four-part longitudinal Investor Readiness for Better Investing study to measure how well British Columbia investors understand the fees they pay and how the fee disclosure reports affected investor knowledge, attitudes and behaviour. Canadian investors began receiving the fee disclosure reports in January, 2017. The BCSC's four-part longitudinal study tracked investor knowledge and behaviour before and after receiving the new reports. The study only looked at investors who work with an investment adviser. The study was conducted by Innovative Research Group Inc. from November, 2016, to March, 2018. For more information on the research findings, visit the BCSC's Invest Right investor education website.