Trust in financial advisers 'high' among investors

Trust in financial advisers has reached an “all-time high”, according to CFA Institute, the global association of investment professionals.

The annual Enhancing Investors’ Trust study covering 15 markets, including the UK, measures trust levels among retail and institutional investors. The CFA Institute commissioned research among 3,588 retail investors and 976 institutional investors.

The trade body said five factors drive higher trust in financial services including strong market performance, fee compression, tech-enabled transparency, greater access to markets, and new personalised products.

Half of retail investors and more than four-fifths of institutional investors say that increased use of technology has increased trust in their adviser or asset manager.

“The highs we’re now seeing in investor trust are certainly cause for optimism, but the challenge is sustaining trust even during periods of volatility,” said Rebecca Fender, CFA head of strategy and governance for research, advocacy and standards. “Technology, the alignment of values and personal connections are all coming through as key determinants in a resilient trust dynamic.”

The research showed that the under-44s, and particularly millennials, are leading the way in their use of technology and in their desire for personalised products.

These investors have relatively high trust in robo-advice, digital apps and digital nudges (such as alerts) about new investment opportunities, and are using online platforms to execute their investment strategies.

They are also eager to use investment products that allow them to invest in line with their personal values, including sustainability and ESG preferences. Climate change and clean energy are the top ESG priorities for retail investors, while institutions are focusing on data protection and privacy, and sustainable supply chain management.

The proportion of institutional investors with high or very high trust in financial services has risen to 86 per cent (65 per cent in last year’s survey).

Among retail investors, trust levels are up to 60 per cent (previously 46 per cent). Retail investors are now more trusting in all markets surveyed, except India, where trust has fallen from 87 per cent to 83 per cent, although India remains the market with the highest trust level.

The US, Singapore and Australia recorded the highest increases in retail trust levels (increasing to 64 per cent, 62 per cent and 45 per cent, respectively). Germany (37 per cent) is now the lowest trust market (previously Australia).

Millennial retail investors - and particularly those aged 25 to 34 - are the most trusting of financial services (72 per cent have high or very high trust.

Almost twice the number of retail investors with advisers (58 per cent) are interested in trying new investment products, compared to investors without an adviser (37 per cent).

Advised investors are also more interested in personalised products (82 per cent) and are willing to pay additional fees for customisation (62 per cent). Direct indexing (cited by 56 per cent), personalised impact funds (53 per cent) and artificial intelligence-driven investments (44 per cent), are of most interest to retail investors with advisers.

Most institutional investors (87 per cent, up from 66 per cent) and most retail investors (50 per cent, up from 48 per cent) say technology increases their trust in their asset manager or adviser - due to more transparency, simplified access to markets and products, and personalisation.

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