Selecting a fund manager is a decision that requires careful consideration, as well as “doing your homework,” says Tim Wiggan, CEO, TD Asset Management. “Whether you are just starting your investment journey or are already further along, you need to take the time to understand whom you are doing business with, whom you are entrusting your money to,” he explains.
Especially in times of high volatility, it pays to be thorough, says Mr. Wiggan, who adds that “reputation matters.
“Fortunately in Canada, we have a number of high-quality asset managers who have a good track record over long periods of time. In my opinion, you want to see how they have performed during difficult times.”
Yet before selecting a fund manager, investors need to be clear on their goals, says Mr. Wiggan, and that’s where advice plays an important role. “An adviser would sit down with clients and determine what they are trying to accomplish. Let’s say one individual’s goal is growing his or her portfolio over a long period of time. Another individual would like to generate income from a portfolio.
“Once those objectives are determined, you and your adviser would partner with an asset manager who manages your money against those goals,” he adds. In the two examples, the adviser would look for stable income-generating funds on the one hand and growth funds on the other.
Mr. Wiggan explains that there is a wide range of mutual funds available in Canada, allowing investors to find a solution that fits their personal objective.
By combining assets from many individuals, mutual funds create efficiencies for investors, who share administrative costs and gain access to money management services.
“With mutual funds, the numbers are generally so high that a range of investors – from individuals to large pension funds – are served by the same team of the best and brightest,” Mr. Wiggan explains. This affordable access to professional investment management – which would otherwise be quite difficult to attain with small amounts of capital – also allows for the delivery of additional services, such as quarterly statements and records for tax purposes.
Transaction costs like commissions and fees that apply to active funds are also divided between a large number of investors. “It’s an efficient way for an individual to gain access to expertise through the power of the collective,” Mr. Wiggan adds.
Since advisers as well as managers are actively involved in creating and realizing a plan, both their efforts are reflected in the fees investors pay. “In addition to the advice fee, you have an asset management fee, which gives you exposure to the experts who manage your money,” he says.
Any company that offers funds to the public makes a range of information available online or in printed material. This can aid investors and advisers in the decision-making process – it can also help in choosing a fund manager, Mr. Wiggan states.
FINANCING THE FUTURE: RETIREMENT READINESS
One of the core activities of the investment funds industry is dedicated to helping Canadians build wealth to sustain them in retirement.
As Canadians live longer, a higher percentage of them will need to rely on individual savings and public pensions. Are they prepared? According to a McKinsey & Co. report, 83 per cent of Canadian households are on track to maintain their standard of living in retirement. The remaining 17 per cent, mostly middle-class Canadians, will face challenges that originate mainly from a lack of long-term savings preparedness, not a lack of income or resources.
The report also notes that Canadians’ savings in mutual funds of $1.2-trillion are 2.5 times the assets being managed within the Canada and Quebec pension plans.
Mutual funds account for 47 per cent of all wealth held in RRSPs, and research demonstrates that individuals who invest in mutual funds are not only better prepared for retirement, they also report higher levels of confidence about their retirement readiness.