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More Choice for More Investors
Fifty years ago, investors had to choose between stocks, bonds and some mutual funds. As Canadian society has matured and demographics have changed, financial firms have had to offer a greater diversity of products.
Date: October 6, 2017
Investors have always been motivated by the same general goals: saving for retirement and increasing wealth. However, the path to investing success looks much different today than it did decades ago, says Michael Schnitman, Senior Vice-President and Head of Product at Mackenzie Investments.
In the 1960s, investors – most of them high-net-worth – and advisors took a “one-size-fits-all” approach to savings. No matter the lifestyle, most owned a similar set of stocks and bonds, and only some mutual funds, in part because that was all there was available. Since then, though, there’s been an explosion of products, led by the popularization of the mutual fund, and that’s allowed people to create more personalized portfolios.
“Decades ago, before mutual funds became mainstream, most investors were high-net-worth and were investing directly into the stock or bond markets,” says Schnitman. “Enter the mutual fund and its democratizing influence to pool assets, reduce investment costs and enhance diversification. It was a game-changer.”
As the financial industry matured, Canadians of all stripes started putting their money in the market, making the one-size-fits-all approach obsolete. And the investor landscape continues to evolve, with women, retirees, millennials and others all looking to find ways to grow their assets.
An increase in choice
For most Canadians, even the boomers who first invested decades ago, product choice is now paramount. The financial industry has come to realize that everyone has different needs and that having more options allows people to invest how they want.
“Retirees, women and millennials are demanding investment options more tailored to their specific needs,” says Schnitman, adding that some of these groups are more inclined to transact online and many are drawn to specific investment themes, such as companies with women in leadership or renewable energy.
Socially responsible investing is becoming increasingly popular with younger generations, says Schnitman, which is why Mackenzie signed the United Nations Principles for Responsible Investment. “That is a signal to the marketplace that we recognize that sustainable and responsible impact investing is important,” he says.
Evolution of ETFs
Another reason the one-size-fits-all approach has fallen by the wayside is the recent growth in exchange-traded funds, which have provided an easier and cheaper way for people to get into the market, says Michael Cooke, Mackenzie Investments Senior Vice-President and Head of ETFs. “The ETF has melded the best elements of investing in individual securities with the benefits of investing in a pooled structure like a mutual fund,” he says.
These funds have also ushered in a new wave of innovation, from smart beta ETFs – products that use alternative index-construction rules to help outperform traditional indexes, like the S&P 500 – to sector-and theme-focused products that allow advisors and investors to more easily create tailored portfolios. “We historically associate ETFs with index-based investments, but that line has blurred,” says Cooke. “Investors now have a much broader array of active or intelligent solutions to choose from.”
As much as the investing landscape has changed over the past 50 years, there’s no doubt it will continue to evolve, adds Cooke. Our increasing lifespans will alter the way we plan for retirement – we’ll need more growth to fund our longer lives, for instance. Mackenzie Investments also recognizes there’s a growing demand for solutions that do multiple things, like reducing risk while producing inflation-exceeding returns. “There are now some very creative solutions in the marketplace that can target something like volatility reduction,” he says.
Despite all the changes that have occurred over time and those yet to come, the key is for investors to work with financial advisors to be invested in the right solutions to achieve their goals. Investment products may change, but making money and saving for the future will never go out of style.
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