Advisors find it increasingly harder to satisfy clients Canada, with investors expecting returns that are almost twice more than advisors find realistic, according to a study by Natixis Global Asset Management Canada.
Canadian investors expect an average annual return of 9.3% above inflation, the study highlighted, while advisors say that 4.8% is realistic in the current market.
The study revealed that advisors are under cost and regulatory pressure, due to which several have yielded to a demand for low-cost passive investments.
However, 69% of advisors said they are concerned about the fact that investors are unaware or do not appreciate the downside market risks associated with passively managed funds.
Forty six percent of advisors said that they use passive investments as active portfolios are really “closet indexers”, which means that they closely track market benchmarks.
Natixis Global Asset Management for the Americas and Asia CEO John Hailer said: “The challenges facing financial advisors are tougher than ever, as they are asked to do more with less in an environment that seems to put low fees ahead of all other considerations, including risk management.”
Of the 150 Canadian financial advisors surveyed, 30% said they are planning to sell their book of business, merge with another firm, while 32% said that they will disengage with smaller clients due to new regulations.
Seventy three percent of advisors said that their biggest challenge to the growth of business is strict regulatory and disclosure requirements.
Also, 74% of advisors believe that the automated model offers some investors better access to advice.
Natixis Global Asset Management Canada CEO Abe Goenka said: “To reach their goals for growth, advisors must overcome significant challenges ranging from new regulations that may limit the clients they serve and the services they offer, to an investment environment dominated by heightened fee sensitivity, to managing in an era of uncertain markets.”