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Mutual Fund News

RRSP season raises fear factor

At least three major money managers are posing some chilling questions about retirement, KEITH DAMSELL writes


Retirement anxiety is the dominant theme of mutual fund advertising campaigns this registered retirement savings plans season.

"The general dilemma with RRSP advertising is how do you break through and get someone's interest? Fear is one way," said Doug Checkeris, head of Media Company, a Toronto firm that buys advertising space. "It's a relatively low-interest category for most people. . . . It's not a simple product to understand."

Perhaps as a result, some fund companies are preying upon the fears that keep aging baby boomers awake at night. At least three money managers are posing some chilling questions.

Altamira Investment Services Inc. has the most biting campaign. The Internet ad features an elderly man and woman dressed as fast-food workers and asks: "Is continuing to work part of your retirement plan?"

The soaring cost of living is the theme of Mackenzie Financial Corp.'s tongue-in-cheek "burn rate" campaign. The newspaper and online ad series notes the rising cost of everything from TVs to tuition and asks: "Can you afford to live in 2017?"

An online ad campaign from IA Clarington Investments Inc. features a worried executive looking to the heavens. "When it comes to investing are you worried about: Losing money? Growth potential? Protecting your capital gains?"

Fear, along with greed, is "one of the long-term themes that keep coming back" during RRSP season, said Bob Scott, publisher of the annual Mutual Funds Advertising Performance Report.

Historic sales trends indicate that the good times are over in the fund ad business. According to Nielsen Media Research, Canada's mutual fund industry spent $67.3-million on advertising in 2000. That figure plunged dramatically to $11.4-million by 2005.

Rising costs and shrinking margins have prompted the bulk of fund companies to shift their media ad spending from the investing public to an exclusive audience of financial advisers.

"The important contact doesn't appear to be the fund company with the investors, it seems to be the investor with the financial adviser," said Bill Holland, chief executive officer of CI Financial Income Fund, a wealth management firm that has no plans to advertise this RRSP season.

The handful of major RRSP campaigns are directed at building brand awareness, said Dan Richards, an industry marketing consultant.

"The bulk of your resources are still targeted at the adviser but you still want to create a level of investor awareness. It makes the job easier for the adviser if the investor has some familiarity with the firm. It opens the door for a conversation," Mr. Richards said.

Teammates again

It may take a while to connect the dots but Jim McGovern and Ben Cheng are together again.

In the late 1990s, Mr. Cheng ran the corporate bond fund at BPI Financial Corp. Mr. McGovern was co-founder of the fast-growing Toronto money manager, best known for gobbling up the much larger Bolton Tremblay Funds Inc. of Montreal.

In August, 1999, BPI itself was taken out by CI Fund Management Inc. and, a month later, Mr. McGovern was gone. Mr. Cheng stuck it out and eventually won fame and fortune as the income trust specialist within CI's well-regarded equity team. Mr. Cheng left CI in 2005 and has since surfaced at Calgary's Overlord Financial Inc.

On Jan. 30, Arrow Hedge Partners Inc. launched the Arrow Canadian Income Fund, an income-focused fund to be managed by Aston Hill Financial Ltd.

Mr. McGovern is the CEO of Toronto hedge fund manager Arrow Hedge. And Mr. Cheng? President of Aston, Overlord's Toronto unit.

Saving grace

Shlomo Benartzi, a doctor of behavioural economics, has a humbling diagnosis for small investors. Odds are you are emotional, irrational and sometimes dysfunctional when it comes to making financial decisions.

"It is depressing how little people know about investing," said Mr. Benartzi, a professor at the University of California, Los Angeles. Investors typically fail to plan their retirement, buy homes at the wrong time and fail to take advantage of low interest rates, he said.

And therein lies the opportunity. Mr. Benartzi, co-chair of the interdisciplinary group on behavioural decision making at UCLA, has been hired to provide pension planning advice to clients of Manulife Financial Corp. of Toronto. The insurance giant manages more than $380-billion, including about $9-billion in retail mutual funds.

But don't fret about stocks or bonds. What you invest in is significantly less important than saving in and of itself, Mr. Benartzi said.

"The focus on the investment component is overvalued," he said. "The first focus is on getting people to save and the second focus should be getting them to save enough. And only then can we talk about where should we invest the money."

© 2007 The Globe and Mail. All rights reserved.

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