90% of retail investors have trust in financial services: Survey

Investors expect higher levels of transparency than ever before, holding their investment managers to the highest ethical standards, and are laser-focused on returns, according to a recent study from CFA Institute, the global association of investment management professionals.The survey, ‘From Trust to Loyalty: A Global Survey of What Investors Want’, following the 2013 Edelman/CFA Institute Investor Trust Study, measures the opinions of retail and institutional investors globally. The findings reveal that investors want regular, clear communications about fees and upfront conversations about conflicts of interest. Investors want fees that are structured to align with their interests, are clearly disclosed, and fairly reflect the value their investment firm provides.“Investors are remaining loyal to their investment managers but only to a certain point. Retail investors can and will jump ship if they are not satisfied – nearly a third of investors have changed firms in the past,” says Vidhu Shekhar, CFA, Country Head, India, CFA Institute. “We must empower investment professionals in their careers and enable them to clearly demonstrate the value they add to the industry and to society.”“Investors are anxious about the markets and hence expect their investment managers to help them navigate through these volatile times. Trust and brand is high on the minds of investors but so are the concerns regarding fees, transparency and performance. It is vital for firms to communicate the value the investment management industry brings to society,” says Jayesh Gandhi, CFA, President, Indian Association of Investment Professionals (IAIP), the member society of CFA Institute in India, and Senior Portfolio Manager, Birla Sun Life Asset Management Company. “The investment management industry must adapt to meet the changing needs of the investors in terms of greater clarity of fees and costs, ethics, and integrity in an increasingly complex risk and regulatory environment,” he adds.Key findings from the study include:Compared with other markets, retail investors in India and China have the highest level of trust in financial services- The trust of emerging markets such as India and China is 90 percent and 89 percent respectively, while for developed markets such as Hong Kong, Singapore and Australia is 64 percent, 63 percent and 50 percent respectively.- The overall trust level of retail investors for the financial services industry among markets polled (India, China, the United States of America, United Kingdom, Canada, France, Germany, Australia, Singapore and Hong Kong) is 61 percent.- While trust has increased, investors remain concerned about ethics, transparency and performance.- Retail investors demand full disclosure and clarity of fees and costs from financial professionals. 80 percent viewed full disclosure of fees and other costs as an important attribute in working with an investment firm, followed by clear explanation of fees and costs.- 45 percent of institutional investors and 43 percent of retail investors would leave an investment firm if data security was compromised.Investors are anxious about global markets and do not believe their investment firms are prepared- Investors revealed a growing anxiety about the state of global finance. Almost one-third of investors feel that another financial crisis is likely within the next three years (33 percent of retail investors / 29 percent of institutional investors), with significantly more in India (59 percent) and France (46 percent). In addition, only half of all investors believe their investment firms are “very well prepared” or “well prepared” (52 percent retail investors / 49 percent institutional investors) to manage their portfolio through a crisis.Study reveals key regional differences in what investors’ value from financial professionals with implications for robo-advisors- The majority of retail investors in India (64 percent) and China (55 percent) and half of investors in Singapore believe having access to the latest tech platforms and tools will be most important to executing their investment strategy. 68 percent of retail investors in India and 56 percent in China consider brand to be more important than people when it comes to trust.- While the majority of retail investors in Canada (81 percent), the US (73 percent) and the UK (69 percent) say they will still value the guidance of an investment professional to help them versus having the latest technology and tools.To review the complete report, executive summary and survey results, visit www.cfainstitute.org/investortrust