BlackRock, Inc. (NYSE:BLK) recently released a study conducted by its iShares exchange traded fund business in Canada that showed the majority of high-net-worth (HNW)(1) investors rely on their investment advisors to help manage risk and provide counsel on investment products they have not considered. However, the results show that advisors can do a better job of keeping clients informed of their financial situation and make recommendations of suitable investment products. The survey offers a rare insight into a niche audience of wealthy Canadian investors, one that normally represents only a small subgroup in surveys of the general population.

iShares Canada’s recent High-Net-Worth Investor survey found:

• 75 per cent of HNW investors agree this is a time of great opportunity in the markets. Yet 56 per cent are still unsure of where to place their money and nearly 64 per cent are re-evaluating their portfolio mix—even though the vast majority of respondents use the services of an investment advisor in at least some capacity. Seventy-six per cent of HNW investors said they turned to advisors for at least some advice or decision-making, while another 11 per cent retain advisors or brokers to effect transactions.

• More than 80 per cent of respondents felt it was important that advisors or financial planners give consideration to their clients’ financial well-being and put their interests first. 

• While 66 per cent of HNW investors are very confident when it comes to decisions around investing for retirement, only 53 per cent were as confident picking between stocks and funds.

Familiarity with ETFs

More than half—or 58 per cent—of HNW investors believe it would be very important to get advice on exchange traded funds (ETFs) from advisors. The survey also showed:

• The majority of HNW investors who are familiar with ETFs are very positive about them relative to mutual funds in a number of areas, including transparency, rate of return, preservation of capital and lower management fees: 71 per cent of this group believe they offer an advantage over mutual funds at preserving capital and 70 per cent say that ETFs provide a significantly better rate of return than mutual funds.

• However, only 27 per cent of respondents say their advisor, broker or financial planner has recommended they buy an ETF and 71 per cent of respondents aged 65+ were unfamiliar with ETFs. Only 12 per cent of respondents have ETFs in their portfolios; 75 per cent of respondents said mutual funds make up a large part of their portfolio, and 71 per cent say stocks also make up a large share of their investments.

• Nearly half of respondents (48 per cent) who said they own mutual funds believed that their mutual funds did not charge fees in the form of management expense ratios, while 9 per cent were unsure.

“The track record speaks for itself: investors are enthusiastic about ETFs and consider them a good investment. Yet it’s unfortunate that such a small number of advisors recommend these products given the positive feedback we received from investors,” said Heather Pelant, Managing Director, head of iShares at BlackRock Asset Management Canada Limited.

“Investors look to their advisor to serve as the level-headed counsellor who provides information on investing trends and unique solutions. Advisors have the opportunity to engage in these discussions to maximize client satisfaction.”

The younger you are, the more concerned you are about value

While nearly 80 per cent of respondents were satisfied with their advisor, that satisfaction wasn’t shared by younger respondents: 63 per cent of HNW investors under age 35 felt it was not worth paying advisors for advice, compared to 26 per cent of those over 35 years old. Conflict of interest is a real concern for all respondents, with 63 per cent believing advisors had a conflict of interest depending on who they worked for.

The survey also found that 61 per cent of HNW investors under 35 years of age felt that advisors provide no better information or advice than can be found on the Internet for free. This statistic drops to almost one-third for respondents 35 and over.

“We’re seeing a direct correlation with younger investors and their likelihood of making independent investment decisions and adopting new ways of investing that offer greater returns, such as ETFs, which have been proven to show better performance than actively managed funds,” said Heather Pelant.

“As these investors age and increase their assets, it will become more important for advisors to make in-roads with this demographic. Advisors can elevate the conversation by coupling one-on-one counsel with sound recommendations of suitable products and solutions such as ETFs, to give them an edge that self-directed online accounts cannot offer. The better an advisor can convince his clients that he has their best interests at heart, the more likely he is able to demonstrate value.”

About the 2010 iShares High-Net-Worth Investors survey

The 2010 HNW investors study was based on an online survey conducted between March 16 and March 29, 2010 by The Gandalf Group, of 500 Canadians across the country who qualified as high-net-worth investors. Canadians who qualified as high-net-worth investors were those who said they owned at least $500,000 in investments not including their homes or workplace or employer-sponsored pensions. The Gandalf Group surveyed a representative sample of the Canadian adult population online, proportionate to age, region and gender in order to identify this sample of high-net-worth investors.

For more information about the new iShares funds, please visit http://www.ishares.ca/. All other inquiries: 1-866-iShares (1-866-474-2737) or email iSharesCanada@blackrock.com.

About BlackRock

BlackRock, Inc. (“BlackRock”) is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At March 31, 2010, BlackRock’s AUM was $3.364 trillion. BlackRock offers products that span the risk spectrum to meet clients’ needs, including active, enhanced and index strategies across markets and asset classes. Products are offered in a variety of structures including separate accounts, mutual funds, iShares^® (exchange traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions. Headquartered in New York City, as of March 31, 2010, the firm has approximately 8,500 employees in 24 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company’s website at http://www.blackrock.com/.

About iShares ETFs

iShares is the global product leader in exchange traded funds with over 410 funds globally across equities, fixed income and commodities, which trade on 16 exchanges worldwide³. The iShares funds are bought and sold like common stocks on securities exchanges. The iShares funds are attractive to many individual and institutional investors and financial intermediaries because of their relative low cost, tax efficiency and trading flexibility. Investors can purchase and sell shares through any brokerage firm, financial advisor, or online broker, and hold the funds in any type of brokerage account. The iShares customer base consists of the institutional segment of pension plans and fund managers, as well as the retail segment of financial advisors and high net worth individuals.

(1) High-net-worth investors were defined as those who owned at least $500,000 in investments not including their homes or workplace or employer-sponsored pensions. This would be the total value of investments including savings and chequing accounts, stocks, shares in a business, commercial real estate, bonds, Canada Savings Bonds, mutual funds, exchange traded funds (ETFs), Guaranteed Income Certificates (GICs), annuities, cash, currency and RRSPs.

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