New CSA study reveals gaps in investor knowledge, attitude and behaviours.
Montreal - Canadians understand the importance of being informed investors, according to a new study commissioned by the Canadian Securities Administrators (CSA). However, they fall short when it comes to putting their knowledge into practice, making them more vulnerable to unsuitable or illegitimate investment opportunities.
According to the study, one-in-three respondents report having been approached with a fraudulent investment opportunity. While many (86%) understand that suspicious investment opportunities should be reported, few (14%) actually do so. Despite this experience with fraud, just over half (51%) of the respondents believe they are just as likely to be a victim of investment fraud as anyone else, while 47% believe fraud is a common occurrence. Canadians feel that investor education and banning rule-breakers should be high priorities for regulators.
These are just some of the findings of the CSA Investor
Index, released to mark the launch of Investor Education Month in October.
Conducted by Innovative
Research Group, Inc., the study was administered to more than 5000 Canadians
to help gauge investor knowledge and skills; understanding of and experience
with fraud; and Canadians’ awareness of their securities regulators and
expectations for them.
"
For the first time, we have a tool that sets out how to effectively measure
the overall attitudes and behaviours of investors across Canada on a regular
basis," says Jean St-Gelais, Chair of the CSA. "Our plan is to
use this information to identify the critical knowledge gaps and address
them in a way that helps Canadians become more engaged, informed and educated
investors."
Canadians seem to understand the importance of investing and the value of investor education. The majority of the respondents (72%) are saving or investing for their future, mostly in RRSP or pension plans. More than half of the respondents understood the importance of key concepts like diversification (64%) when making financial decisions. However, other results show that knowledge is not being put into practice:
• Most (88%) believe a financial plan is important, but over half (58%) don’t have one.
• Most respondents (92%) agreed on the importance of conducting independent research before investing. However, 49% did not personally research their most recent investment, and 22% invested immediately after hearing about an investment opportunity. Among the 44% of those who didn’t personally research their most recent investment, 72% bought the investment solely on the advice of their financial adviser.
• More than half of respondents (51%) feel confident in their financial investing decisions, and 64% report they are confident about where to go when checking out investment opportunities. Yet they show mixed performance when it comes to understanding fundamental concepts (such as risk tolerance).
In addition, the study highlights differences in some of the regional data across Canada:
Alberta
• 42% have a financial plan that includes clear investment goals and 60%
report being familiar with their most recent investment,
and could explain the risk
and benefits to someone else in detail (compared
to 38% and 53% nationally, respectively).
• Most likely to personally research their investments (57% as compared
to 48% nationally) and invest in opportunities
only after taking time to think about
it (72% compared to 65% nationally).
• 38% believe they have been approached with a possible fraudulent investment.
• 80% agree it is important to report even the suspicion of fraud, but
only 10% actually report investment fraud to the
authorities (compared to 14% nationally).
Atlantic Canada
• Are most likely (43%) to think that they've been approached with a fraudulent
investment (compared to 36 % nationally).
• Only 32% agree that investment fraud is common in their province (compared
to 47% nationally).
• Only 23% report being aware that there is a provincial agency responsible
for regulating financial investments in their province (compared to 45% nationally).
•
91 % of Atlantic Canadians viewed "educating investors so they can better
protect themselves against fraud" as "extremely important" or "very
important".
British Columbia
• 92% believe having a financial plan is important (compared to 88% nationally).
• Of those who believe they have been approached with a fraudulent investment
opportunity, 14% (compared to 11% nationally) report having invested money
in a fraudulent investment.
• 52% believe that investment fraud is common in their province (relative
to 47% nationally, 38% Alberta and 32% Atlantic Canada).
• 68% feel confident they know where to find information on investment
opportunities.
Ontario
•
92% believe it’s important to have a financial plan, but just 40% have
a financial plan with clear investment goals (relative to 38% nationally).
• Of the 41% who believe they have been approached with a fraudulent investment
opportunity, 11% report having invested money in a fraudulent investment.
• 50% believe that investment fraud is common in their province (relative
to 47% nationally).
• 70% worry that they don't have enough savings to meet their needs, compared
to 66% nationally.
Prairies
• 85% agree that they should not invest without independently researching
an investment opportunity, yet only 45% personally researched their most recent
investment (compared to 48% nationally).
• 34% believe that investment fraud is common in their province, and 33%
believed they had been approached with a fraudulent investment.
• 62% reported being introduced to fraud over the Internet (compared to
49% nationally).
• 53% were familiar with their most recent investment and believed they
could explain the risks and benefits; 19% felt that they did not understand how
risky
each of their investments are (compared to 12% nationally).
Quebec
• 31% have a financial plan with clear investment goals (compared to 38%
nationally).
• 94% agree that they should not invest without independently researching
an investment opportunity, yet only 39% personally researched their most recent
investment (compared to 48% nationally).
• 51% believe that investment fraud is common in their province, and 58%
believe that they are just as likely to be a victim as anyone else, above the
national
average of 51%.
• 35% agreed that one of the best ways to make money in the stock market
is to look for hot tips (compared to 19% nationally).
The full study is available online on the CSA website www.csa-acvm.ca
The CSA Investor Index is a mixed methodology study combining
a random digit dialling telephone study with an in-depth online study. A
2,000 person telephone
study was used to provide an incident rate for weighting purposes of Canadians’ investing
profile. The online study was used to develop a profile of Canadian investor
segments, as well as to provide a large sample of Canadians who have actually
experienced fraud.
The CSA Investor Index online survey was conducted by Innovative Research
Group, Inc. (www.innovativeresearch.ca), a national public opinion research
firm, between August 10 and Monday, August 31, 2006. Results from the survey
are based on 5,568 completed online interviews of Canadians, 18 years of
age or older.
The sample used has been weighted according to telephone data on Canadian
investing behaviour and 2001 Census data to accurately reflect a representative
cross-section of Canadians. With a sample of this size the aggregated results
are considered accurate to within ±1.79 percentage points, 19 times
out of 20 (margin of error will vary among regional segments).
The CSA, the council of securities regulators of Canada’s provinces and territories, coordinates and harmonizes regulation for the Canadian capital markets. Their mandate is to protect investors from unfair or fraudulent practices through regulation of the securities industry. Part of this protection is educating investors about the risk, responsibilities and rewards of investing.
For more information:
CSA Website: http://www.csa-acvm.ca/
Yukon Securities Registry Richard Roberts Richard.roberts@gov.yk.ca 867-667-5225 |
British Columbia Securities Commission Andrew Poon APoon@bcsc.bc.ca 604-899-6880 1-800-373-6393 (BC & Alberta only) www.bcsc.bc.ca |
Securities Registry Northwest Territories Donald MacDougall donald_macdougall@gov.nt.ca 867-920-8984 www.justice.gov.nt.ca/SecuritiesRegistry/SecuritiesRegistry.htm |
Alberta Securities Commission Tamera Van Brunt tamera.vanbrunt@seccom.ab.ca (403) 297-2664 1-877-355-0585 (toll free) www.albertasecurities.com |
Nunavut Securities Registry Jennifer MacIsaac jmacisaac@gov.nu.ca Phone: (867) 975-6591 |
Saskatchewan Financial Services Commission |
Manitoba Securities Commission Ainsley Cunningham aicunningh@gov.mb.ca 204-945-4733 1-800-655-5244 (Manitoba only) www.msc.gov.mb.ca |
Ontario Securities Commission Laurie Gillet lgillet@osc.gov.on.ca 416-595-8913 1-877-785-1555 (toll-free in Canada) www.checkbeforeyouinvest.ca |
Autorité des marchés financiers Frédéric Alberro 514-395-0558 poste 2176 1-800-361-5072 (Québec only) www.lautorite.qc.ca |
Commission des valeurs mobilières du Nouveau-Brunswick Natalie Green natalie.green@nbsc-cvmnb.ca 506-643-7745 1-866-933-2222 (New Brunswick only) www.nbsc-cvmnb.ca |
Nova Scotia Securities Commission Chris Pottie pottiec@gov.ns.ca 902-424-5393 www.gov.ns.ca/nssc |
Department of Attorney General Prince Edward Island Mark Gallant mlgallant@gov.mb.ca 902-368-4552 www.gov.pe.ca/securities |
Financial Services Regulation Division Newfoundland and
Labrador Doug Connolly Connolly@gov.nl.ca 709-729-2594 www.gov.nl.ca/scon |
Innovative Research Group Greg Lyle 416 642-6429 E-mail: glyle@innovativeresearch.ca www.innovativeresearch.ca |