The changing face of demographics, the growth of ETFs and fund wraps, falling MERs and changing advisor practices are at the root of challenges facing the mutual fund industry, according to a report by the Investment Funds Institute of Canada (IFIC).
The report, entitled Canadian Investment Funds Industry: Recent Developments and Outlook, examines the current state of the investment funds industry in Canada, including trends that impact investors.
The report examines, at a high level, the role of investment funds in the day-to-day savings and investing activities of Canadians; the products that have been and continue to be used by savers and investors; how these products are accessed by Canadians of various levels of wealth and investment knowledge; and the changes to the investing environment that have occurred over the past decade.
Beyond the overarching demographic trends, fund product and distribution has also been influenced by: the changing nature of competition and emergence of non-traditional competitors; regulatory changes focused on investor protection; changing attitudes of investors toward risk and value as they look to preserve capital; and the ongoing impact of new technologies on all stakeholders.
Investment fund industry retooling to meet rapidly changing competition
“The Canadian investment fund industry is facing some challenges as it re-tools itself to deal with shifting demographics and heightened investor demands for innovative solutions, transparency and value,” said Goshka Folda, president of Investor Economics and Global Head of Research for Strategic Insight, which compiled the report. “Our new report comments on a rapidly changing competitive environment, examines the recent wave of product and pricing innovations, as well as considers the future impact of technology on operations and delivery.”
One of the most significant changes in advice delivery over the past 20 years stems from the change from embedded fee models to unbundled fee-based advice, notes the report.
Hybrid channels, technology and the use of artificial intelligence analytics, as well as pressure to accelerate change through technology have all led to margin pressures in the industry and investor demand for greater value.