Understanding Shareholders' Use of Information and Advisers (pdf)

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CHAPTER 4Shareholder Market Segments by Needs for Information and Professional AssistanceFIGURE 29 Market Share of Respondent Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33FIGURE 30 Use of Professional Financial Advisers by Do-It-Yourself Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34FIGURE 31 Do-It-Yourself Shareholders' Interest in Learning More About Investing in Mutual Funds . . . . . . . . . . . . . . . . . . . .34FIGURE 32 Use of Professional Financial Advisers by Adviser-Partnership Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35FIGURE 33 Adviser-Partnership Shareholders' Interest in Learning More About Investing in Mutual Funds . . . . . . . . . . . . . . . .35FIGURE 34 Use of Professional Financial Advisers by Passive Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36FIGURE 35 Passive Shareholders' Interest in Learning More About Investing in Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . .36FIGURE 36 Demographic and Financial Characteristics by Respondent Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37FIGURE 37 Mutual Fund Ownership Characteristics by Respondent Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38FIGURE 38 Respondent Segments' Pre-purchase Information Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39FIGURE 39 Respondent Segments' Post-purchase Information Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40FIGURE 40 Respondent Segments' Relationship with Professional Financial Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41FIGURE 41 Respondent Segments' Preferences for Mutual Fund Educational Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42APPENDIX AFIGURE 42Research MethodologyStatistical Reliability for Determining Accuracy of Observed Percentages by Sample Size andPercent of Responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44APPENDIX BSupplemental DataFIGURE 43 Contacts with Primary Professional Financial Adviser per Year by Nature of Relationship . . . . . . . . . . . . . . . . . . . . .45FIGURE 44 Acceptance of Adviser's Fund Purchase Recommendations by Nature of Relationship . . . . . . . . . . . . . . . . . . . . . . . .45FIGURE 45 Primary Financial Adviser’s Single Most Important Function by Nature of Relationship . . . . . . . . . . . . . . . . . . . . . .46FIGURE 46 Value Shareholders Associate with Primary Financial Adviser by Nature of Relationship . . . . . . . . . . . . . . . . . . . . . .46FIGURE 47FIGURE 48FIGURE 49FIGURE 50Fund-related Information Considered Prior to Most Recent Purchase by Nature of Relationshipwith Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47Pre-purchase Mutual Fund Information Sources for Most Recent Purchase by Nature ofRelationship with Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48Periodicals Most Frequently Consulted Before Most Recent Fund Purchase by Nature ofRelationship with Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49Mutual Fund Information Monitored at Least Four Times a Year by Nature of Relationshipwith Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50FIGURE 51 Sources Used to Monitor Mutual Funds by Nature of Relationship with Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . .51FIGURE 52 Use of Mutual Fund Account Statements by Nature of Relationship with Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . .52FIGURE 53 Use of Mutual Fund Annual Reports by Nature of Relationship with Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53FIGURE 54 Use of Mutual Fund Prospectuses by Nature of Relationship with Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54FIGURE 55 Interest in Learning More About Investing in Mutual Funds by Nature of Relationship with Adviser . . . . . . . . . . . .55FIGURE 56 Mutual Fund Topics of Interest by Nature of Relationship with Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55FIGURE 57 Preferred Sources for Mutual Fund Educational Materials by Nature of Relationship with Adviser . . . . . . . . . . . . . .56FIGURE 58 Preferred Format for Mutual Fund Educational Materials by Nature of Relationship with Adviser . . . . . . . . . . . . . .57vi
I N T R O D U C T I O NBACKGROUNDThe growth of the mutual fund industry since the early 1980shas led to an expansion in the sources of information on fundinvestments beyond mutual fund companies themselves andtraditional financial advisers. Mutual fund information is nowavailable, for example, from financial magazines, newsletters,mutual fund rating services, television and radio programs,and online computer services.Despite this notable increase in information sources, onlylimited research has been undertaken to assess the extent towhich the information from these various sources actuallymeets investors’ needs. The principal research to date includestwo shareholder surveys conducted by the Institute in 1996,one evaluating various methods of presenting risk informationand the second examining shareholder reactions to innovationsin mutual fund prospectus disclosure. 1The Institute undertook a survey of mutual fund investorsto examine their information needs, their use of the fullgamut of information sources, and the role played by financialadvisers in investment decisions. This report presents thefindings of this survey.The specific objectives of the survey were:■■to examine the role of professional financial advisers inmutual fund decisionmaking;to identify information shareholders seek before andafter investing in a fund;■■■■to identify the sources of information that shareholdersconsult before and after buying a mutual fund;to identify the information shareholders obtain frommutual fund prospectuses, annual reports, and accountstatements;to examine the information needs of those shareholdersinterested in learning more about mutual funds; andto segment shareholders according to their needs forinvestment information and use of professional financialadvisers in the fund purchase process.SUMMARY OF RESEARCH METHODOLOGYA two-stage research program was designed with these objectivesin mind. In the first stage, Abt Associates qualitativelyassessed shareholders’ pre-purchase information needs and therole of professional advisers in focus group interviews. Theinformation gathered from these discussions was used todevelop the survey instrument for the second stage.The second stage comprised a telephone survey of shareholderswho had bought a stock or bond fund in the five yearspreceding the survey. A “purchase,” for these purposes, waslimited to shares bought from a fund in which no shares hadbeen owned before the five-year period. Fund purchases madethrough employer-sponsored retirement plans were notincluded in the survey. A total of 1001 40-minute interviewswere completed (See Appendix A).1Shareholder Assessment of Risk Disclosure Methods (Investment Company Institute, 1996) and The Profile Prospectus: An Assessment by MutualFund Shareholders (Investment Company Institute, 1996).1
Page 1 and 2: ICI Research SeriesUnderstandingSha
Page 3 and 4: Copyright © 1997 by the Investment
Page 5: L I S T O F F I G U R E SEXECUTIVE
Page 9 and 10: company sponsoring the fund, the fu
Page 11 and 12: ■chases. However, more Adviser-Pa
Page 13 and 14: C H A P T E R 1The Role of Professi
Page 15 and 16: Respondents Who Effectively Delegat
Page 17 and 18: Respondents Who Have a Collaborativ
Page 19 and 20: elationship as a joint effort, and
Page 21 and 22: Adviser’s Most Important Function
Page 23 and 24: C H A P T E R 2Information Needs Be
Page 25 and 26: ters. Only 19 percent of respondent
Page 27 and 28: MONITORING MUTUAL FUND INVESTMENTSI
Page 29 and 30: Among respondents consulting a prof
Page 31 and 32: three. In particular, the majority
Page 33 and 34: C H A P T E R 3Improving Shareholde
Page 35 and 36: FIGURE 27Preferred Sources for Mutu
Page 37 and 38: C H A P T E R 4Shareholder Market S
Page 39 and 40: account, yield or rate of return, p
Page 41 and 42: the survey, compared with ten years
Page 43 and 44: FIGURE 38Respondent Segments’ Pre
Page 45 and 46: FIGURE 40Respondent Segments’ Rel
Page 47 and 48: A P P E N D I X AResearch Methodolo
Page 49 and 50: A P P E N D I X BSupplemental DataF
Page 51 and 52: FIGURE 47Fund-related Information C
Page 53 and 54: FIGURE 49Periodicals Most Frequentl
Page 55 and 56: FIGURE 51Sources Used to Monitor Mu
Page 57 and 58:
FIGURE 53Use of Mutual Fund Annual
Page 59 and 60:
FIGURE 55Interest in Learning More
Page 61 and 62:
FIGURE 58Preferred Format for Mutua
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