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MF News Investors want advisors to disclose their earnings: CFA Global Investor Survey

Investors want advisors to disclose their earnings: CFA Global Investor Survey

A recent survey conducted by CFA Institute shows that 80% of global retail investors want their advisors to disclose their fees.
Rosevina Gonsalves and Nishant Patnaik Sep 12, 2017

While many believe that investment performance is the only thing that matters to clients, a recent CFA Institute study titled ‘From Trust To Loyalty: A Global Survey Of What Investors Want’ revealed that 80% of retail investors are more concerned with the commission and incentives paid to their advisors.

These investors want their advisors to disclose their earnings they receive from the fund houses on the investment advice.

CFA Institute has conducted this survey across four continents - North America, Europe, Asia (including countries like India) and Australia in which 3,312 retail investors have responded to the survey. The aim is to see what matters to retail investors and where they think the financial distribution industry is falling short.

The survey found that 79% of retail investors want to understand fees (expense ratio) as to how much they are paying and for what they are paying. These investors want their investment firms to explain to them about fees and costs.

Source: CFA Institute study

However, 73% investors say that the investment performance from their portfolios is what matter to them. These investors expect higher returns from their investment portfolio compared to other firms.

The survey also found that underperformance of investment instruments is the key reason for retail investors to sack their advisors.

Another key reason why investors sack their advisors is data breach. Over 43% of retail investors would sack their advisors if they compromise their confidential information, shows the survey data. “Clearly, data breaches across industries from health care to retail have shaken consumer confidence in financial services as well”, said the report.

6 Comments
Raj Talati · 1 week ago
Are we serious, we are quoting a report with a survey sample size of 3312 that too "Global Survey".

Leave apart global I think such sample size minuscule even for only one state of India.
Prashant · 1 week ago
I completely agree with Mr.Raj Talati. There are 2 things to this. First you as an industry manufacturers hands in gloves with SEBI came out with direct plan which is malafide because your disclaimer says that it is risky and they come without any professional help but they either go on google and ask which is a best performing fund and invest and then they jeep asking questions in open forums about whether they have done right or do they need to change the portfolio or they go to manufacture's office where they never get an unbiased and genuine and a correct advise(AMCs themselves have written to SEBI about this). Now in both the cases they are at risk which investors do not understand because it has been fitted in their mind(by SEBI and AMFI) that thr distributors earn a huge brokerage on the investments which we all know is completely false. Manufacturer charges from 200 to 250 bps and we get maximum 80 bps. So manufacturer earns much more than us. This is the only industry where manufacturer has better margin than distributors. Also by charging fees the product actually becomes much more expensive. In fact retail investors are the last investors who would want to onow our income. They just see what and how much have they invested and how much they get after all the charges including brokerage. Originally the awareness was about the product now they are in disguise of awareness putting investors money at a great risk by selling direct plans. Even in a country like Ameruca boyh advisory and distribution both models co-exist and voth are successful(I say tgis because they only look at other country's policies or regulations and blindly bring them here because they do not want to go out from their a/c cabins and talk to the peiple on the street. They do not want to be closer to ground. They are paid for nothing. In fact they should be sacked but we are being chased and one day we will be out of work because of this nonsensical regulator at the cost of crores of investors which are in this great country of BHARAT. Only foreign policies
tdevendra · 1 week ago
this is atrocious statement. the investors apprehension at most IS the volatility,risk perseverance, market behavior, in comparison with other safe deposits. in fact it is quite contradictory, as retail involvement in systematic investment plans is a outstanding example of the work done by IFA'S whose work is commendable. our mentality is crab mentality. they never ever allow any system, organization to function properly. they undercut and have negative perception of the working atmosphere. such crazy, and pessimistic people should be abhorred in the society. they bring disrespect to the entire clan of IFA's FRATERNITY. because of them the society's up gradation is falling apart-sadbhavana
K.Sathisan · 1 week ago
Disclosing the earnings of distributor or advisor doesn't make any justification. In the present competitive scenario it is very difficult to get investments from individuals as most since direct investment opportunities exist. Few IFA's perform well and few in average level.This will demotivate and will create a negative impact on the IFA.
K V Raghupathi · 1 week ago
Dear Rosevina Gonsalves and Nishanth Patnaik,

Are you to consider the size of samples that is the base for this analysis has any relevance in Indian context?

You cannot equalise the matured western market with 45% penetration into MF and ours, hardly below 5%. You have an obligation to the viewers to analyse, accept and report the information and not just to fill the space for an article.
Sanjeev C. Bhatkar · 1 week ago
I totally agree with views expressed by Raj Talati , Prashant , T. Devendra , K. Sathisan and K. V. Raghupathi. Yes ; in our country too , people do ask or insist on revealing commisssion of mf distributor / IFAs. We know who are these people. These people are not those who are genuinely interested in keen on investing in Mutual Funds. These people are those , who have been dealing with hapless , hoplless L I C ( Life Insurance Corporation of India ) agents over last five decades ( generation after generation ). These people have become seasoned by virtue of experience and intuitive knowledge of pressurising LIC agents and extracting commission. However , it is also true that they are risk averse because of total lack of securities market knowledge - courtesy, equally knowledgeable LIC agents ( more than 95% ) who aren't competent to educate their policy holders ( obviously ). These people cannot see beyond LIC. We should ignore these people completely. It is other people , who, after first meeting with mf IFA / distributor , realise quickly that they are talking to a different person who is offering an interesting and wide range of investment options with confidence. In fact , are relieved to know that it is not LIC about which this new person ( IFA ) is talking. This initial meeting with IFA makes these " other people " interested in knowing more about mf and most of the time they make up their mind to start investing in mf , either throygh initial small amount or an SIP. These people are rarely keen to know about IFA's earning. Moreover , we , as IFA / mf diztributor do get welcome from such " other people " which we deserve. Hence , this so - called survey is not at all reflecting ground reality in our country as , statistically , it does not represent " investor behaviour " of our country's investors. We should , therefore , ignore such survey which is done by violating all statstical parameters w.r.t sample selection.
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