Press Release
Economic uncertainty not changing Canadians' retirement strategies
Mutual funds still most commonly held retirement investment despite high fees – but there are ways to turn those fees into savings
February 9, 2009, Toronto, ON - Many Canadians are not changing their savings habits despite the current financial crisis, according to a recent Angus Reid poll. The survey, commissioned by ING DIRECT, found that more than half of Canadians (55%) plan to contribute approximately the same amount to their 2008 RSP versus last year, while 30% said they would contribute less.
According to the survey, mutual funds are the most commonly held investment for retirement savings and Canadians are not planning to change their reliance on these funds, despite the fees that eat away at their investments. This could be because most investors are not aware of the long-term costs associated with investing in mutual funds. Indeed, the survey found that while most Canadians are aware that they are charged fees for their mutual funds (80%), half of them don't know how much they are paying to hold these investments or the impact of these fees on long-term savings potential.
Further, while Canadians have taken steps in recent months to re-evaluate their financial decisions by consulting with advisors and paying closer attention to market swings, the survey found that only eight per cent have taken the initiative to become more knowledgeable about the fees they pay.
"We want Canadians to know there are many opportunities to save more money and the easiest way to do this is by taking control of their own portfolios," said Peter Aceto, President & CEO, ING DIRECT. "Saving doesn't need to be complicated and you don't have to pay to get advice on how or where to save – especially when we've learned it doesn't guarantee better returns. Investing some time to learn about how fees impact a portfolio and how easy it is to find low-cost investment options can help people increase the value of their savings today and significantly over the long term."
The survey results indicate an opportunity for Canadians to become more aware of the fees associated with their funds, and how they might be able to lower them. Although approximately half of Canadians did not know how much they paid in fees for their funds, those who did know claimed to pay about 2.5% in fees on average. Some funds have lower fees, such as the index-based ING DIRECT Streetwise Funds which charge a 1% management expense ratio (MER).
The average Canadian balanced fund charges a 2.6% MER. Simple math shows that contributing $10,000 per year for 10 years at a return of 6%, will save an investor about $10,000 in fees and generate approximately $12,000 more in total growth with a fund that charges a 1% MER verses the average 2.6%.
The survey also revealed that Canadians' investment choices, knowledge and behaviour varies greatly across the country.
- Mutual funds are owned by more Canadians in their RSPs than any other financial product (88%). The three most popular products used for retirement savings after mutual funds are GIC's (23%), individual stocks (21%) and money market funds (21%).
- Western Canadians own more mutual funds than other regions in Canada (51% vs. 39% nationally).
- In Quebec, bonds are more popular retirement investments in comparison with Ontario, the West and Atlantic Canada (33% vs. 10% nationally).
- Western Canadians bought the most mutual funds over the past six months (27%) while Atlantic Canadians bought the least (15%) of all regions.
- When asked about investment behaviour in light of the current downturn, Ontario residents said they are less likely to contact a financial advisor with respect to their investments than other provinces (67% vs. 80% nationally).
- Only 15% of Canadians surveyed know the average fee charged by fund companies to hold mutual funds. Those in Western Canada were most knowledgeable (15%) while Atlantic Canadians were least knowledgeable (9%).
- Seventy-five per cent of those surveyed indicated they currently have a financial planner or investment advisor. Of these respondents, 7% intend to switch their primary financial advisor or do more investing on their own (11%).
- When asked about financial advisors given the market downturn, Atlantic Canadians said they are the most likely to keep their primary financial advisor (88%) while Westerners are least likely to keep their advisor (77%).
- Seventeen per cent of those aged 55+ expect to retire later than planned due to the recent downturn while 30% of those aged 35-54 indicated retiring later than planned.
From November 21, 2008 to November 27, 2008, Angus Reid Strategies conducted an online survey among a randomly selected, representative sample of 1,004 adult Canadians through the Angus Reid Forum. The margin of error for the total sample is +/- 3.1%, 19 times out of 20. The results have been statistically weighted according to Statistics Canada's most current education, age, gender and region Census data to ensure a representative sample of the entire adult population of Canada. Discrepancies in or between totals are due to rounding
About ING DIRECT
ING DIRECT is Canada's largest direct bank with over 1.6 million Clients and more than $23 billion in total assets. ING DIRECT gives the power of saving to all Canadians by offering high-value, simple products such as high interest savings accounts with no fees or service charges and low rates on mortgages. Low cost, index-based mutual funds are sold through ING DIRECT Funds Limited. ING DIRECT has been operating in Canada since 1997, and since that time Clients have earned more than $3 billion in interest. Clients can bank with ING DIRECT 24 hours a day, 7 days a week, at www.ingdirect.ca or by calling
About ING DIRECT Funds Limited
Mutual funds are offered by ING DIRECT Funds Limited, a wholly-owned subsidiary of ING Bank of Canada. ING DIRECT Funds Limited offers mutual funds across Canada except in Quebec and the Territories.
About ING DIRECT Asset Management Limited
ING DIRECT Asset Management Limited, a wholly owned subsidiary of ING DIRECT, is the manager of the ING DIRECT Streetwise Funds.
To arrange an interview or for more information, please contact:
Lisa Naccarato
ING DIRECT
Office: 416-758-5072
Mobile: 416-885-0348
lnaccarato@ingdirect.ca
Lynnette Visaya
ING DIRECT
Office: 416-758-5544
lvisaya@ingdirect.ca
