Invisible funds

There was a big financial trade show in Toronto recently. The discount brokers were there, junior mining companies were prospecting for investors, some ETF companies had exhibits, on-line trading companies attracted a lot of interest and several financial publishers were on hand.

But guess who wasn’t there: mutual fund companies. With a couple of small exceptions, they were invisible to the 3,000 or so attendees at the first World Money Show to be held in Canada (another is scheduled for Vancouver in April). CI Investments, Investors Group, Mackenzie Financial, AGF, Invesco Trimark, Franklin Templeton — none of them had a booth, speaker or any other presence at the three-day event.

Incredibly, there was only one presentation out of several dozen that focused on mutual funds. And it didn’t come from a fund company but from Brian O’Neil, senior fund analyst at Morningstar Canada, who gave a seminar on the topic “How to Pick Winning Funds”. Brendan Caldwell, CEO of Caldwell Investment Management and portfolio manager for two of their funds, also gave a workshop but it was on the broader theme of “The Equity Markets: Past, Present, and Future”.

I participated in three events at the show and I realized afterwards that not only did I not mention mutual funds once but no one even asked about them.

All this was in stark contrast to the days of the old Financial Forum when fund companies dominated the scene, getting their message out to investors. But in recent years, they have made a collective decision to aim their marketing directly to financial advisors and let them do the selling for them.

I think this is a strategic mistake that has contributed to the stagnation of the mutual fund industry in this country. Assets under management are almost flat from a year ago and member companies of the Investment Funds Institute of Canada reported net redemptions of about $8.5 billion over the 12 months to September 30.

Meantime, exchange-traded funds (ETFs), which were much better represented at the show, are eating into market share. In terms of total assets, they are still way behind the mutual fund industry — but they’re growing quickly.

Perhaps it is time for the industry to rethink its marketing approach and get back to telling ordinary Canadians why mutual funds should be an integral part of their portfolios. With the growing number of do-it-yourself investors in this country, relying almost exclusively on advisors to spread the word isn’t doing the job.

That said, it seems unlikely the fund industry is about to make any changes if the views of Blake Goldring, CEO of AGF Asset Management, are any indication. In an e-mail response to a request for comment, he said that do-it-yourself investing is not the best approach for most people and strongly urged the use of financial advisors.

“Nowadays, as you know, there are so many financial products out there,” he said. “Most people lead such busy lives that they need someone else they can trust to sift through all the information and present them with the financial options available. Advisors also help investors set goals, bring a big picture perspective to financial planning and are accountable to regulators. The well-respected advisory network is one of the best ways we believe investors can meet their financial savings goals and fulfill our mission at AGF to help investors succeed.”

So it appears AGF isn’t planning any change in its marketing. If you want to find out about their funds, you’ll need to consult an advisor. AGF, and most other companies, aren’t going to talk to you directly.

Adapted from an article that originally appeared in Mutual Funds Update, a monthly newsletter that provides advice on fund selection and strategies. For subscription information, click here.

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