Returns and Investor Outcomes: An Innovative Analysis

Consider two matters that are of tremendous importance to both investors and to the financial advisors who serve them.

  1. First, consider Canadian financial advisors’ perceptions of the ability of the asset management companies they work with to deliver above average returns for their clients.
  2. Second, consider the investor outcomes that asset managers produce for the people who have their money with these firms.

Credo measures both of these. One by surveying more than 1,000 advisors annually, asking them specifically which companies deliver above average returns.  The other we measure by asking thousands of investors whether they feel ahead or behind their financial expectations. We ask the same investors which companies they have managing their investments in order to establish the relationship between investor outcomes and the companies that are related to the delivery of those outcomes.  Then, when we consider the two factors together, we are able to draw some interesting insights about the performance and investor outcome production Canada’s prominent asset managers.

Exhibit 1, below, shows a simple 2-by-2 matrix that plots more than 25 asset managers against these two dimensions.  The result of our analysis is comprised of four quadrants.

Exhibit 1. Matrix presenting advisors’ perceptions of asset managers’ returns (North to South) vs the outcomes experienced by the same companies’ investors (West to East)

  1. Quadrant 1 is in the top right corner of our matrix.  In the “North end” of the map, advisors feel companies are delivering above average returns. Investors who have their money with asset managers that appear in this area of the map report better than average investor outcomes (the East-end of the map).  It should seems reasonable to find companies in this quadrant since their above average returns should logically produce positive investor outcomes.
  2. The second quadrant of the matrix (labeled 2 in the top left corner) is the area of the map where advisors feel the companies are delivering above average returns (again, the North-end of the map) though investors who have their money with these asset managers tend to report worse than average investor outcomes (the West-end of the map.) This is a concerning and somewhat confusing area of the map where reason suggests we shouldn’t find many companies. They are delivering above average returns according to the advice community; why would their investors not feeling ahead of the game, financially speaking?
  3. The third quadrant is another very reasonable place to find companies.  It is an area that is reserved for the companies that deliver lower-than-average returns and where investors feel relatively behind their financial expectations. Though no companies would want to reside in this third quadrant, it’s understandable that some companies will reside in this space.
  4. The fourth quadrant is another challenging area to rationalize.  Companies that fall into this quadrant are delivering above average investor outcomes but are seen by advisors as delivering lower than average returns. Perhaps the companies that reside in the 4th quadrant are missed opportunities for advisors.



Firstly, if the two factors mapped here were highly correlated — if ideal investor outcomes were positively related to advisors’ perceptions of above average returns — then the companies would “line-up” in the map along the matrix’s diagonal… from the bottom left to the top right.  The companies that advisors see delivering weak returns and that deliver poor investor outcomes would all be in the bottom left, in quadrant 3. The asset managers delivering great investor outcomes while advisors believe they deliver above average returns would be in the top right corner, in quadrant 1.

In fact, if we momentarily ignore some of the companies and imagine a line running from the location of Bridgehouse …through the map’s origin (where we find IA Clarington, RBC Mutual Funds and Manulife Investments) through TD Asset Management and up to Fidelity, we can see that these companies are roughly where we would imagine they belong, along the diagonal, if returns and outcomes were positively correlated.  Delivering above average returns should produce positive investor outcomes.  Delivering lower than average returns should produce poor investor outcomes.

The map becomes particularly interesting when we recognize that many companies deviate substantially from the diagonal.  This shows that these two dimensions are not nearly as correlated as one might expect.

Franklin Templeton, for instance, (outlined in gold) is mired down in the 4th quadrant where advisors are firmly convinced that the company delivers sub-standard returns and yet investors who have their money managed by Franklin Templeton are more likely than almost any other investors to feel as though they are ahead of their financial expectations.  Franklin Templeton apparently delivers ideal investor outcomes though the company is seen as delivering poor returns by the Canadian advice community.

Canoe (outlined in blue) resides in the 2nd quadrant where advisors feel that the asset managers are delivering better-than-average returns. Investors who have opted to have their money managed by Canoe (or other companies that reside in this quadrant) are significantly less likely to indicate that they feel as though they are ahead of their financial expectations. This despite the fact that advisors indicate that Canoe delivers above average returns.

So, there is either more to producing ideal investor outcomes than advisors perceptions of their chosen suppliers’ abilities to deliver above average returns… or advisors perceptions of their suppliers’ returns are somewhat off the mark. Other research Credo has done in the past indicates it’s a combination of these two conclusions.  Investors are not all and only about returns and advisors are often mistaken about which companies deliver the the best returns. (The fact of the matter… advisors are far less about the supplier companies they work with and far more about the investment management teams they elect to have manage their clients’ money… regardless of that company those teams are affiliated with. We recognize this.)

A Related Analysis

Examining the same set of companies with respect to advisors’ perceptions of returns analyzed in conjunction with the advisors’ willingness to sell these companies’ investment instruments to their clients is also interesting.  Exhibit 2 maps the companies West to East based on the level of support that advisors are putting behind their recommendations of companies — a factor we call willingness to sell.  To the right-hand end of the map (the East) are those companies that advisors indicate they are more likely to recommend to their clients. Those that reside to the left-hand end of the map (the West,) are the companies that advisors are marginalizing and, to a greater extent, are eliminating from their product shelves.

For the purpose of this analysis we have again mapped advisors’ perceptions of the companies’ returns North-South in the map.  Companies that advisors feel are delivering above average returns are near the top (the North end) of the map.  Companies that advisors feel deliver lower than average returns are in the bottom of the map… in the South end.

Exhibit 2. Matrix presenting advisors’ perceptions of asset managers’ returns (North to South) vs advisors’ willingness to sell the companies’ product to investors (West to East)

Here we see Franklin Templeton in the South-West quadrant… where advisors perceive poor returns and are less willing to support the company while Bridghouse sits in the South-East quadrant… where advisors feel the company delivers sub-standard returns but still earns their support.

Fidelity remains in the North-East quadrant, well supported from a sales perspective, presumably because the company delivers above average returns for clients. Canoe, by contrast, resides in the North-West quadrant, delivering above average returns according to advisors, though these advisors find it difficult to justify offering the company a great deal of support.


These analyses bring us to a number of insights and conclusions.

Advisors are inspired to work with a range of suppliers for reasons far beyond returns alone. Similarly, many investors claim to experience desirable investor outcomes despite being invested with asset managers that advisors feel deliver the highest levels of investment returns.

The analysis also reveals many development opportunities for brands that have been a part of the Canadian investment landscape for a long time.  In particular, companies that are positioned in quadrant 4 of our initial analysis:

  • Franklin Templeton
  • National Bank
  • BMO Mutual Funds

These are companies that advisors feel are not delivering returns… but that are clearly delivering better than average investor outcomes.  Each of these brands is afforded little support by the advisor community as a result.  Sales, marketing and brand management executives at these firms need to develop a new and improved position for their brands, leveraging the fact that the investor outcomes they produce are so very desirable.

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