Mutual Fund Investors in Canada 2011:Sixth Annual Landscape Study

Overview of Key Findings

2

Agenda

Methodology

Key Themes

I. Confidence in Mutual Funds

II.The Advisor-Client Relationship

III.Fees & Compensation

IV.First Use of Financial Advisor

V.Staying Informed about Mutual Funds

3

Methodology

Telephone survey of randomly-selected, representative national sample of 1,006 mutual fund investors in Canada

Conducted June 10 – 21, 2011 6th annual wave of this study Data weighted to ensure accurate regional representation

Actual Interviews(#)

Margin of Error(%)

Atlantic Canada 101 ±9.8%

Quebec 201 ±6.9%

Ontario 302 ±5.6%

Manitoba/Saskatchewan 100 ±9.8%

Alberta 152 ±7.9%

British Columbia 150 ±8.0%

TOTAL 1,006 ±3.1%

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Confidence in mutual funds has rebounded to pre-2008 levels.

Advisors remain dominant source of mutual funds for Canadian investors

But, their clients turn to advisors for more than just purchasing – valuing/trusting their advisory expertise and information-dispensing function

Indeed, almost all mutual fund investors are satisfied with their advisor’s advice, and most express:

Comfort with their knowledge of the fees they pay

Preference for an embedded approach to paying for advice

Confidence about their level of investing knowledge

Comfort that they have right information to make informed investing decisions

Key Themes

I. Confidence in Mutual Funds

5

6

For The First Time Since 2008, Canadian Mutual Fund Investors Have More Confidence in Mutual Funds Than in Any Other Type of Investment Tested

Q3-8: Using a 10-point scale, where 1 means ‘not at all confident’ and 10 means ‘completely confident’; overall, how confident are you that each of the following investment products would help you meet your household’s financial goals? How about: (RANDOMIZE AND READ) (June 2006, n=1,865) (June 2007, n=2,508) (June 2008, n=1,895) (June 2009, n=1,002) (June 2010, n=1,002) (June 2011, n=1,006)

II. The Advisor-Client Relationship

7

8

Advisors Remain Dominant Source of Mutual Funds

Q9: For the next few questions I would like you think about the last time you invested in a mutual fund. When buying those mutual funds did you: (READ AND RECORD ONE ONLY) (June 2006, n=1,865) (June 2007, n=2,508) (June 2008, n=1,895) (June 2009, n=1,002) (June 2010, n=1,002) (June 2011, n=1,006)

9

Most Turn To Their Advisor For More Than Just Purchases

Received any other services from your advisor, such as investment advice, budgeting, or planning for future expenses

Q19: (IF PURCHASED MUTUAL FUNDS FROM ADVISOR IN Q9) Beyond purchasing mutual funds, have you received any other services from your advisor such as investment advice, budgeting, or planning for future expenses? (June 2011, n=813)

10

Advisor Customers Continue to Rely on Advisors’ Advice

Q15: (IF PURCHASED FROM ADVISOR IN Q9) And overall, when making decisions about mutual funds, which one of the following best describes the roles that you and your advisor play in the decision? (IF NECESSARY: By ‘advisor’ I mean the person you purchased the mutual fund from. Your advisor could be a bank employee, a broker, an insurance agent, a financial planner, or have a number of other titles.) (READ AND RECORD ONE ONLY. DO NOT ROTATE) (June 2006, n=1,596) (June 2007, n=2,089) (June 2008, n=1,512) (June 2009, n=829) (June 2010, n=856) (June 2011, n=813)

11

Almost All Say Advisor Discussed Suitability of Fund at Last Purchase

Q10: (IF PURCHASED FROM ADVISOR IN Q9) And still thinking back to the last time you invested in a mutual fund, did your advisor: Discuss how well suited that mutual fund is for reaching your investment objectives. (RANDOMIZE AND READ LIST) (IF NECESSARY: By ‘advisor’ I mean the person you purchased the mutual fund from. Your advisor could be a bank employee, a broker, an insurance agent, a financial planner, or have a number of other titles.) (June 2006, n=1,596) (June 2007, n=2,089) (June 2008, n=1,512) (June 2009, n=829)(June 2010, n=856) (June 2011, n=813)

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Satisfaction With Advisor’s Advice Remains High

Q18: (IF PURCHASED FROM ADVISOR IN Q9) I would now like to ask you about your relationship with your financial advisor – meaning the advisor who you buy your mutual funds from. Using a scale from 1 to 10 where 1 means ‘not at all satisfied’ and 10 means ‘completely satisfied’, how satisfied are you with the advice provided by your financial advisor? (RECORD ONE ONLY) (IF NECESSARY: Your advisor could be a bank employee, a broker, an insurance agent, a financial planner, or have a number of other titles.) (June 2006, n=1,596) (June 2008, n=1,512) (June 2009, n=829) (June 2010, n=856) (June 2011, n=813)

25% 58% 10%4%

1%1%

23% 55% 12%8%

2%

1%

20% 58% 13%6%

3%1%

20% 62% 11%4%

2%

Very satisfied (10) Satisfied (7-9)Somewhat satisfied (5-6) Not very satisfied (2-4)Not at all satisfied (1) Don't know/ Refused

2011

2010

2009

2008

TotalSatisfied

93%

91%

90%

93%

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III. Fees & Compensation

13

14

Most At Least Somewhat Confident in Knowledge of Any Fees They Pay

Q32: Overall, using a scale from 1 to 10 where 1 means you are ‘not at all confident’ and 10 means you are ‘very confident’, how confident are you about your knowledge of any fees you pay for your mutual funds? (June 2010, n=1,002) (June 2011, n=1,006)

14% 40% 17% 14% 6% 9%

12% 38% 17% 21% 9% 3%

10% 28% 20% 24% 15% 3%

12% 36% 18% 20% 9% 5%

15% 36% 27% 10% 6%5%

19% 33% 18% 17% 11% 3%

11% 27% 25% 16% 18% 2%

16% 33% 22% 15% 11% 3%

Very confident (10) Confident (7-9)Somewhat confident (5-6) Not very confident (2-4)Not at all confident (1) Don't know/ Refused

2011

2010

TotalConfident

71%

63%

70%

78%

66%

58%

67%

71%

Overall

18-44

45-64

65+

Overall

18-44

45-64

65+

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Percentage of Investors who Recall Advisors Discussing Compensation, Fees, and MERs Has Been Increasing Since 2009

Q11-13: (IF PURCHASED FROM ADVISOR IN Q9) And still thinking back to the last time you invested in a mutual fund, did your advisor: (RANDOMIZE AND READ LIST) (IF NECESSARY: By ‘advisor’ I mean the person you purchased the mutual fund from. Your advisor could be a bank employee, a broker, an insurance agent, a financial planner, or have a number of other titles.) (June 2006, n=1,596) (June 2007, n=2,089) (June 2008, n=1,512) (June 2009, n=829)(June 2010, n=856) (June 2011, n=813) Make you aware of how he/she would be compensated for your purchase of that fund. Discuss whether or not you will be charged a sales commission when you buy or sell the mutual fund - also called ‘front-end load’ and ‘back-end load’ fees. Discuss the fee the mutual fund company receives for managing the fund, also known as the Management Expense Ratio or the MER?

16

Mutual Fund Investors Prefer Embedded over Unbundled/Separate Approach for Paying for Advisor’s Advice

Preferred Method of Paying for Advisor’s Advice

Q33: (IF USES ADVISOR IN QUESTION 9) Payment for advisors’ advice tends to be included in mutual fund fees. Some people say they want to pay for their advisor’s advice (ROTATE OPTIONS) through fees that are part of their mutual funds, while other people say they want to pay through a separate annual payment. Which of these two views best represents your own preference, assuming both methods cost the same amount? (June 2010, n=1,002) (June 2011, n=1,006)

Through fees that are part of mutual funds

Paying separate annual payment for advice

Don't know

Refused

IV. First Use of Financial Advisor

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More Than One-Third of Investors Had Less Than $10,000 in Savings/Investments When They First Started Using an Advisor

Value of Savings/Investments When First Started Using an Advisor

(Among those who provide an amount)

37%

20%

17%

8%

6%

5%

2%

2%

3%

Under $10,000

$10,000 To Less Than $25,000

$25,000 To Less Than $50,000

$50,000 To Less Than $75,000

$75,000 To Less Than $100,000

$100,000 To Less Than $150,000

$150,000 To Less Than $200,000

$200,000 To Less Than $300,000

$300,000 Or More

37%

57%

74%

82%

88%

93%

95%

97%

Under $10,000

Under $25,000

Under $50,000

Under $75,000

Under $100,000

Under $150,000

Under $200,000

Up to $300,000

Aggregate Value of Savings/Investments When First Started Using an Advisor

(Among those who provide an amount)

Q31: (IF PURCHASED MUTUAL FUNDS FROM ADVISOR IN Q9) When you first started using a financial advisor, which of the following categories best represents the total value of your household’s savings and investments at that time, excluding your primary residence? Was it: (READ LIST) (June 2011, n=813)

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Investors Had Little To No Investing Experience When They Started Using an Advisor

44% 30% 16%8%

2%

1%

1%

No experience A little experienceSome experience A moderate amount of experience A lot of experience A great deal of experienceDon't know/Refused

Investment Experience When First Starting Using Advisor

Q25: (IF PURCHASED MUTUAL FUNDS FROM ADVISOR IN Q9) When you first started using a financial advisor, how much investing experience did you personally have? Did you have: (June 2011, n=813)

How much investing experience you

personally had when first using financial

advisor

No experience/

A little experience

74%

20

Investors Have Worked With Advisors For 18 years, On Average

Time Since First Started Using an Advisor

19% 18%15%

30%

16%

2%<1%

Less than10 years

10 to lessthan 15years

15 to lessthan 20years

20 to lessthan 30years

Over 30years

Don'tknow

Refused

2011 (Mean: 18 years)

Q24: (IF PURCHASED MUTUAL FUNDS FROM ADVISOR IN Q9) How many years ago did you first start using a financial advisor? (June 2011, n=813)

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The Most Common Reasons For First Contacting an Advisor Are Wanting To Invest For Retirement and Wanting a Better Return on Money

Q26-30: (IF PURCHASED MUTUAL FUNDS FROM ADVISOR IN Q9) How influential were each of the following reasons in your decision to first start using a financial advisor, on a scale of 1 to 10, where 1 is not at all influential and 10 is very influential. How about: (READ AND RANDOMIZE) (June 2011, n=813)

33%

2%

2%

4%

4%

3%11%

14%

33%

24%

14%

30%

27%

42%

47% 16%

15%

12%

21%

23%

15%

4%

6%

20%

17%

22%

12%

15%

6%

5%

Very influential (10) Influential (7-9)Somewhat influential (5-6) Not very influential (2-4)Not at all influential (1) Don't know/Refused

You wanted to invest for retirement

You wanted to achieve a better return on your money than you could achieve on your own

You wanted to buy mutual funds, so you needed an advisor

You had just accumulated enough money to start investing

You wanted to invest to cover future expenses aside from retirement

Totalinfluence

87%

87%

68%

64%

56%

Reasons for First Contacting an Advisor

V. Staying Informed about Mutual Funds

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Investors Feel They Are Knowledgeable About Investing in Mutual Funds - Perception Has Been Increasing Slowly Since 2007/2008

Q2: Overall, using a scale from 1 to 10 where 1 means you are ‘not at all knowledgeable’ and 10 means you are ‘very knowledgeable’, how knowledgeable would you say you are about investing in mutual funds? (RECORD ONE ONLY) (June 2006, n=1,865) (June 2007, n=2,508) (June 2008, n=1,895) (June 2009, n=1,002) (June 2010, n=1,002) (June 2011, n=1,006)

2011

2010

2009

2008

2007

2006

Totalknowledge

81%

77%

75%

72%

72%

76%

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Almost All Comfortable They Have Right Information to Make Informed Decisions, Although Intensity Not Recovered Since Post-2008 Decline

50% 41% 6%2%

1%

43% 47% 7%2%

1%

40% 51% 5%2%

2%

41% 53% 4%1%

1%

Very comfortable Somewhat comfortableNot too comfortable Not at all comfortableDon't know/ Refused

Very comfortable/Somewhat

comfortable

94%

91%

90%

91%

2011

2010

2009

2008

Q17: Thinking back to the last time you invested in a mutual fund, prior to making this last investment, did you feel very comfortable, somewhat comfortable, not too comfortable, or not at all comfortable that you had the right information to make an informed decision? (RECORD ONE ONLY) (June 2006, n=1,865) (June 2008, n=1,895) (June 2009, n=1,002) (June 2010, n=1,002) (June 2011, n=1,006)

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Majority Feels Information They Receive From Mutual Fund Companies Answers All Or Most Of Their Questions

Q16: Overall do you feel the information you receive from mutual fund companies answers all, most, some, a few or none of your questions about your mutual fund investments? (RECORD ONE ONLY) (June 2006, n=1865) (June 2011, n=1,006)

2011

2006

Total All/Most/

Some

87%

88%

Does Fund Information Answer Your Questions?

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Advisors Remain The Most Popular Channel Through Which Investors Want to Receive Information About Mutual Funds They Are Considering For Purchase

Q14: How would you prefer to receive information about a mutual fund you are considering for purchase? Would you prefer to receive it (ROTATE OPTIONS) through regular mail, through email, by visiting a web site, from an advisor, or through another method? (RECORD ONE ONLY) (June 2007, n=2,508) (June 2008, n=1,895) (June 2009, n=1,002) (June 2010, n=1,002) (June 2011, n=1,006)

Mutual Fund Investors in Canada 2011:Sixth Annual Landscape Study

Overview of Key Findings