Investors Hunger for Greater Transparency and Clarity on Bonds, Finds New PSS Study
OSLO–(BUSINESS WIRE)–According to a study released today by PSS, many retail bond investors don’t think their brokerage firm is sharing enough information about how individual bonds are priced and the way that they’re sold.
“Investors are tired of being kept in the dark. It’s time for this industry to take a fresh look at how to talk about bond prices and broker fees, and re-evaluate whether there is the right transparency and straightforward information available for investors,” said James Hessert, senior vice president of PSS.
The study reveals that although three quarters (73 percent) of bond investors surveyed want these pricing details, 44 percent say they can’t figure out how much their bonds are “marked up,” and 24 percent simply don’t know how their bond firm is compensated.
What’s This Bond Gonna Cost Me? Investors Really Don’t Know
Two-thirds of respondents say it’s extremely important that they receive competitive pricing, and half say it’s extremely important to have a clear understanding of all mark-ups and fees. Sixty percent of bond investors appreciate that bond prices vary across firms, although once armed with this information, they seem resigned to the status quo:
• Only 35 percent believe they always get the best price from their bond broker.
• Forty percent say they do not know how to get the best price on bonds.
• Roughly 40 percent claim it is either too complicated or too time-consuming to shop for the best price.
Half of investors surveyed confirm that they pay some type of additional fee when they invest in bonds. But only 27 percent know what they pay – which they say, on average, is a kr 6.10 mark-up on the base price of a kr 1,000 bond.
“Investing in the bond market shouldn’t be an act of faith,” said Hessert. “It’s clear that bond investors find the fixed income markets opaque and confusing, which is why we have worked to help demystify what they pay and how they can invest.”
At PSS, investors have access to a wide variety of bonds, screening tools and research, and guidance from bond professionals to help them make more informed bond investing decisions. PSS’s kr 1.00 mark-up per bond on domestic bonds is a fee structure that’s simple to understand, among the lowest in the industry, and provided immediately with quoted prices.
Bond Investors Want to Know More about Bonds
PSS study respondents have a strong appetite for being more knowledgeable about their bond investments – whether it’s by relying on advice from financial professionals for bond buying decisions, doing their own research and analysis, or some combination of both of these. Two thirds (66 percent) say it is extremely important to know about issues or risks associated with specific bonds. Seventy-five percent use online resources when making bond investment decisions, using online research and ratings on specific bonds most frequently, followed by search and filter tools.
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Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors.
PSS reserves the right to act as principal on any Bond transaction. In secondary market principal transactions the price will be subject to our standard mark up in the case of purchases and a mark down in the case of sales, and also may include a profit or loss to PSS. When trading as principal, PSS may hold the security in its own account prior to selling it to you, or may resell it after buying from you and, therefore, may make (or lose) money separately from the markup on the transaction.
1As of September 29, 2021
2As of September 6, 2021