Underperformance of schemes is the top reason why retail investors switch from one fund house to another, finds the latest CFA Institute survey. The survey shows that 53% of retail investors would leave an investment firm if its funds underperform.
The survey covered 3,312 retail investors in 10 countries including India, each of whom having investible assets of at least $100 thousand and a total of 502 institutional investors in six countries each of whom are responsible for their institution’s investible assets of at least $10 million.
Top reasons why investors leave a fund house
|
What would make you consider leaving your current investment firm? |
% |
|
Underperformance |
53 |
|
Increase in fees |
46 |
|
Data/confidentiality breach |
43 |
|
Lack of communication/responsiveness |
38 |
|
Regulatory sanction |
30 |
|
Investment team shows a lack of conviction in their investments |
29 |
|
High levels of staff turnover |
24 |
|
Fails to adopt a standard voluntary code of conduct for the industry |
22 |
|
Negative word of mouth |
22 |
|
Departure of your relationship manager |
20 |
|
Has publicly stated corporate views on social or political issues that I disagree with |
17 |
|
Inappropriate social media comments |
14 |
|
Acquisition/merger of firm |
14 |
|
Departure of the lead portfolio manager |
13 |
|
Departure of CEO/other senior executive |
7 |
|
Other |
1 |
|
None of these |
7 |
|
Source: CFA Survey |
|
The other top reasons for leaving an investment firm were increase in fee (46%), data/confidentiality breach (43%) and lack of communication/responsiveness (38%).
Interestingly, only 13% retail investors said that they would leave an investment firm if the lead portfolio manager/fund manager quits. Also, the departure of CEO or other senior executive would not make retail investors leave a fund house.
Besides, only 14% of retail investors said that they will leave a fund house if it is acquired by another firm.
What is more important – brand or people?
When asked what is more important (people or brand) when partnering with an investment firm, a majority of retail investors in countries such as Canada, US, Australia, France and UK said that people are more important than brands. In China (56%) and India (68%), retail investors assigned more importance to brands than people. This is perhaps the reason why Indian AMCs which have a higher brand visibility and recall are preferred more by retail investors, say industry experts.
What matters to retail investors?
Communication both during down market and well as up market, low fee/expenses, educational information which is not connected to a sale and real-time access to account information/portfolio on mobile devices were most valued by retail investors from AMCs. On the other hand, being active on social media and industry awards were not as important for retail investors.
|
What matters to retail investors? |
% |
|
Has adopted a recognized code of conduct for the industry |
69 |
|
Understands my unique tax and estate planning position |
68 |
|
Communicates with me regularly, in down markets as well as up markets |
68 |
|
Demonstrates that the firm’s values are aligned with mine |
65 |
|
Offers products with high ratings/grades (i.e., 5 star-rating) |
64 |
|
Keeps fee levels among the lowest in the marketplace |
63 |
|
Employs investment professionals with credentials from respected industry organizations |
62 |
|
Shares relevant and non-promotional educational information with me that is not connected to a "sale" |
61 |
|
Provides online tools I can use to test changes in my strategies |
55 |
|
Provides real-time access to my account information on mobile devices |
55 |
|
Incorporates environmental, social and governance factors in investment decisions |
51 |
|
Develops a personal relationship with me beyond financial transactions |
48 |
|
Is quoted often in the press as an expert |
40 |
|
Receives industry awards |
40 |
|
Has a strong presence in social media channels |
28 |
|
Source: CFA Survey |
|
