In a recent survey of investor attitudes (the web page with this article has disappeared since the time of writing), “Canadian investors are more influenced by soft issues such as their relationship with their investment advisor than by hard-core financial factors such as portfolio performance.”
It’s amusing to see portfolio performance described as just one of the “hard-core financial factors.” Portfolio returns should be the main concern of an investor. Instead, “investors are desperate for relationships with investment advisors that help them feel more comfortable.”
It’s hard to know for certain why people focus on less important issues, but I’ll try a guess. Maybe most investors have no idea what returns they should expect, but they know how they feel and they know whether they like their advisor as a person. So, the judge their experience by the things they understand.
In a perfect world, people would be able to examine their portfolios to determine their asset mix and then compare their returns to a similar mix of index returns. This comparison would expose sky-high MERs most of the time. Unfortunately, few investors can do this.