Two studies within a span of one week indicated DIY investing is really taking off in Canada. From an advisor’s perspective, the trend raises some alarm.
The vast majority (85%) of online investors are using their online investing accounts for either long-term goals or a combination of long-term and short-term ones, according to the latest RBC Direct Investing poll.
Another study, TD Waterhouse Women’s Online Investing Poll, found the number of women do-it-yourself (DIY) online investors is increasing, accounting for 66% of participants signing up in the last five years. Meanwhile 50% of women surveyed said they plan on increasing the portion of their portfolio with their online brokerage.
The issue has sparked a mixed reaction from the financial services industry. Those who didn’t entirely downplay its long-term impact on advisors’ business put it as a pinch of concern and a pound of opportunity.
“Gone are the days of either [DIY] or [professional advice], the silos are breaking down,”” said Patricia Lovett-Reid, senior vice-president, TD Waterhouse. “People are saying it is something they need to understand as opposed to leaving it up to a financial advisor to look after their money, hoping things will work out in the end.”
There is, however, no reason for advisors to push the panic button just yet. “I don’t think [advisors should] feel threatened; if anything they may feel more energized because an informed client is a better client, and the relationship stands a chance of lasting that much longer,” she said.
Does than mean there is room for everyone in the sandbox? Lovett-Reid thinks so, but warns that the rules of the game are changing. “There’s a lot more willingness and desire on the part of investors to get involved, “she said, noting that market uncertainty led many to want a better understanding of what was going on.
Michael MacDonald, vice-president, Strategy, RBC Direct Investing, agrees. “The last few years the markets have been so volatile that a lot of people committed themselves to saying ‘I need to know more to feel comfortable’.”
“People are beginning to recognize that at some point they’re going to be entirely responsible for their financial future,” said Lovett-Reid. “It’s a matter of being participative and in some cases driving it if you fully are in the discount brokerage arena, as apposed to abdicating responsibility to someone else.”
MacDonald says this has led investors to move back and forth both from the advice and DIY space.
There is an absolutely important role for the advisor, but the advisor has to take on a bit more of an educative role. Lovett-Reid says investor desire to take control is an indication of their thirst for knowledge. “I think what they are really saying is, ‘I need to understand this better’ and in some cases they may start out small and may wind up managing all of their own money.”
There’s definitely an interest in being self-reliant admits MacDonald, but he asserts “it’s not like we have everyone wanting to shift from advice to non-advice.”
But advisors can expect clients to ask them a lot more informed questions. “That’s where advisors need to focus their attention,” he said
The advisor, Lovett-Reid agrees, has to be cognizant that this is an education and a process in which they want to participate. Those who fail to do so will soon find “money is mobile, sensitive and it will move [elsewhere].
“I do think the role of an advisor is evolving, you can see it; clients don’t expect their advisor to have all the answers but want to feel they’re respected and valued,” said Lovett-Reid.