- CFA Institute calls for greater transparency on fees, performance and strong ethics across investment industry; investor trust to follow, study finds
Kolkata, April 16, 2018: the financial services industry,says The Next Generation of Trust: A Global Survey on the State of Investor Trust conducted by CFA Institute, the global association of investment professionals.
The survey shows that 71% of Indian investors trust the financial services industry, as compared to 44% globally and 49% in the Asia Pacific region. Also, 92% of Indian investors still trust the system and capital markets,believing they have a fair opportunity to profit.
However, although Indian and global investors believe the most important attribute when making a decision to hire a financial adviser is being able to trust that the adviser will act in investors’ best interest, less than half (45%) of Indian retail investors say their financial adviser always puts investors’ needs first. The survey also shows growing concern amongst Indian investors who said they have already left or would consider leaving investment firms as a result of a data or confidentiality breach (41%), under performance (39%), and lack of communication (37%).
The survey reveals a significant gap between what more than 3,100 retail investors and 800 institutional investors in 12 markets expect from their financial advisers and how satisfied they are with the relationship.
“Trust plays a vital role in the world of finance and has consistently been the greatest determinant in selecting a financial adviser.If one-third of global investors and less than half of Indian investors believe their adviser always puts investors’ interests first, it is a challenge to our industry to earn back their trust. With 87% of Indian respondents under the age of 45 years, all advisers need to do is to demonstrate a strong commitment to ethics, expertise, and transparency,” said Vidhu Shekhar, CFA, Country Head, India, CFA Institute.
The survey reveals that investors in India rate the financial services industry higher than investors in all other surveyed markets, with 71% investor trust. China is second with 70% trust and Canada third with 51% trust for the industry. Within Asia Pacific, Australia and Hong Kong respondents had the lowest trust for the industry at 31% and 35%, respectively.
Investors surveyed in India said that their trust in advisers is driven by those with reliable security measures to protect data (83% importance),and those who provide easy-to-understand investment reports(82%), employ investment professionals with credentials from respected industry organisations (81%), generate returns better than a target benchmark (79%), fully disclose fees and other costs (78%), charge fees that reflect the value received from the relationship (77%), and disclose and manage any conflicts of interest (72%).
Key findings–
Transparency, performance, ethics drives trust and satisfaction for clients.
- 77%of Indian investors prefer a “Brand I Can Trust” over “People I Can Count On”. Overall, 70%of Indian investors work with a financial adviser versus 54% of investors globally. However, 81%of those relationships were made in the last six years.
- The top attributes Indian investorslook at while selecting a financial adviser – 31%select an adviser who is putting the client first,21% look at ability to achieve high returns, 17% seek commitment to ethical conduct, and12%go with recommendations by someone they trust.
- 56%of Indian investors believethere will be another financial crisis in the next three years, the highest number globally, with the likely next source of a financial crisis attributed to:46%national/global politics,34%governmentsdefaulting on debt,31%cryptocurrency bubble, and28%cyberattack. However,83%of Indian investors believe their advisers are well or very well prepared to manage their portfolio through a financial crisis, as compared to55%of investors globally.
- 92% of Indian investors, the largest percentage globally, still trust the system and believe they have a fair opportunity to profit in the capital markets as it is functioning well and will grow in the coming years.
For investors, technology and humans are not interchangeable – so far.
- While 72%of Indian investors are more likely to trust recommendations from a human adviser than a robo adviser, 74% say the increased use of technology in financial services has led to more trustworthy relationships with their advisers. And although 15% of Indian investors distrust the robo-adviser industry, as against 40% globally,85%of Indian investors say that in three years it will be more important to have technology tools to execute their own strategy rather than human advice. Notably, interest in technology has increased since 2016 in every market surveyed and among every age group.
Standards and professionalism cultivate trust.
- 81%of Indianinvestors believe it is important that investment professionals have credentials from respected industry organisations. 84%of Indian investors say theywould trust an advisermore if he or she adhered to a voluntary code of conduct for the industry.
Survey Methodology
In collaboration with CFA Institute, Greenwich Associates gathered responses from 3,127 retail investors and 829 institutional investors from Australia, Brazil, Canada, China, France, Germany, Hong Kong, India, Singapore, United Arab Emirates, United Kingdom and United States. The survey was fielded in November and December 2017. Retail investors were 25 years or older with investible assets of at least US$100,000 and institutional investors with at least US$50 million in assets under management, from public and private pension funds, endowments and foundations, insurance companies and sovereign wealth funds. The margin of error for retail investors is +/- 1.9%; the margin of error for institutional investors is +/- 2.1%.
Corporate Comm India(CCI Newswire)
