A survey by the CFA Institute titled ‘Earning Investor’s Trust’ shows that retail investors give more importance to their relationship with advisors (individual MFDs and RIAs in Indian context) than performance of funds.
The survey says that retail investors still prioritize having someone trusted to act in their best interest and a recommendation from someone they trust when looking to hire an adviser, with an assumption that returns will follow.
On the other hand, among institutional investors, returns have become relatively more important in the hiring process for an investment firm than having someone trusted to act in their best interest.
Further, the survey findings shows a strong majority of institutional investors (74%) and retail investors (77%) say generating returns similar to or better than a target benchmark is important in creating a trusted relationship. Only 66% of institutional investors and 44% of retail investors think investment firms and advisers are delivering well on this.
Client-first values
Retail investors are looking for an adviser that acts as a teacher/coach to help them make better decisions (65%) versus an expert that makes decisions on their behalf (35%).
Besides, it suggests advisors should provide transparency around products and fees. This is because 83% of retail investors with an adviser want their financial adviser to offer products from different firms, not just those that he or she gets a commission on.
The fee conversation
The survey reveals that although the majority of investors (73% of institutional investors and retail investors with an adviser) believe the fees they pay are fair, high fees are one of the top reasons retail and institutional investors consider leaving an investment firm or adviser.
Commitment to competency
When investors were asked how they would view the staff working on their portfolio if they showed that they undertake relevant continuous professional development each year. About 63% of institutional investors and 66% of retail investors said they would expect them to be able to manage their portfolio better. Education is expected to provide practical benefits for clients. Furthermore, if their investment firm started requiring their staff to do continuing education each year, 95% of institutional investors and 82% of retail investors would trust the firm more and this is especially true among younger investors.
