This Financial Literacy Month, it has never been more important to become an informed and vigilant investor

Since the onset of the COVID-19 pandemic, extensive discussions have examined the potential impacts on Canadians’ household finances, employment and – of course – investments.

The Canadian Securities Administrators (CSA) recently released our 2020 CSA Investor Index. The study, which is conducted every few years, measures investment knowledge, investor behaviour and incidences of investment fraud among Canadians. We were curious to see the results in the current landscape – would Canadians be more or less confident in the economy and their personal investments? Are they taking the proper measures to protect themselves from investor fraud?

This Financial Literacy Month, improving financial literacy and investor education has never been more important. So, what are some of the most surprising findings that were uncovered in the 2020 CSA Investor Index survey?

Canadians’ risk tolerance has remained unchanged, despite a rapidly changing economic environment in 2020

The study found that Canadian investors remained relatively unfazed by the recent market volatility. In fact, 37 per cent of Canadian investors reported being “very” or “fairly” aggressive in their investing risk tolerance in 2020, compared to 35 per cent in 2017.

It also found that only 48 per cent of respondents reviewed their risk tolerance within the last year, which is only up by 2 per cent compared to the 2017 report.

While it is encouraging to see Canadian investors may not be letting fear or anxiety drive their investing decisions, the findings also indicate that investors may not be assessing if their risk tolerance is appropriate to weather market ups and downs. While this could be in part because it is difficult to conduct in-person meetings with financial advisers due to COVID restrictions, the opportunity to conduct virtual meetings is now a viable option and one we encourage investors to consider and request.

Reviewing risk tolerance regularly and developing a financial plan helps ensure your investments are aligned with your personal financial goals. It is important to remain diligent, especially during uncertain economic times when the level of your risk tolerance could quickly shift due to a number of different factors.

Investment fraud has remained steady, but the profile of victims is changing

While the survey found that reported investment fraud incidents are decreasing, the age composition of fraud victims has shifted. When we first conducted the Investor Index research in 2006, 50 per cent of those aged 55+ were fraud victims and only 10 per cent for those aged 18-35. In 2020, fraud victimization for those aged 55+ has remained consistent at 51 per cent but has increased to 28 per cent for those under 35.

The Investor Index research did not delve into the causes of this change so we can only speculate. However, we do note that there has been an increase in online and social media investing scams over the same 10 year time period, which may be leading to the shift in more younger Canadians becoming fraud victims.

Fraudsters are becoming more sophisticated in using technology and social media platforms to lure investors. When considering any investment, we encourage investors of all ages to carefully research the investment by checking sources such as public company filings or investment fund reports and ensure that the individual or firm selling the investment are registered to do so. Finally, become familiar with the Red Flags of Fraud on the CSA website so that you can more easily spot an investment scam.

Many Canadians don’t perform background checks on their financial advisers and don’t know how much they pay

In fact, 64 per cent of survey respondents reported never conducting a background check on their financial adviser.

Protecting yourself starts with checking an investment adviser or professional’s background to ensure you are working with a reputable person who can legally sell and recommend investment products to you. You can use the CSA’s National Registration Search to see if the person or company you are dealing with is duly registered.

Furthermore, only half (52 per cent) of Canadians who currently or usually have a financial adviser said they know exactly how much they have paid their financial adviser, which is consistent with 50 per cent in 2017. Check in regularly with your financial adviser to see if your plan reflects your situation and know the investment and account fees that you are paying.

Test your investment knowledge

At the CSA, we provide investors with relevant and timely information on investing basics so they can make informed decisions. Take our new Financial Literacy quiz today to build your investment knowledge and learn about important investing concepts.