Financial advisers have lost the trust of investors and can do little to try to win it back, according to a global study.
Investors feel financial advisers have poor ethics and shroud their dealings to hide charges and conditions, says research published by the CFA Institute.
The institute is a trade body that grants chartered status to financial advisers who pass a series of exams.
More than half of investors (53%) in the UK, USA, Hong Kong and Canada told the CFA Institute that they did not believe that investment firms would do the right thing when faced with a challenge.
The study found that independent investors are less trusting than institutions – with 51% of retail clients doubting the integrity of their advisers, compared with 49% of institutions.
Wary of advice
Trust issues also varied between countries – American (44%) and British (39%) investors have less trust than those in Hong Kong (68%)
Overall, investors were wary of financial advisers but more trusting of the markets and believed trust and transparency to be more important than financial returns.
Three-quarters felt they received a fair return from investing in capital markets, but even though markets fared better than advisers, the level of trust was still relatively low.
Only a fifth (19%) of investors strongly agreed investing in the markets gave them a fair chance of making a good return.
John Rogers, CFA president and chief executive of the CFA Institute, explained the study sent “a clear message” to financial and investment advisers.
Shady dealings
“Advisers must have the absolute trust of their clients and we must work harder to put some of the shadier parts of recent financial dealings behind us,” he said.
“Investors must have confidence in their financial advisers, so investment firms must demonstrate they have ethics and transparency as well as the ability to return a good investment performance.”
The survey also revealed some other findings:
- Investors believe individuals are responsible for trust building and only 55% of clients felt the investment managers in the markets they had worked with engendered this confidence, compared with 41% of financial advisers, 38% of state regulators and 35% of global regulators.
Investors felt government needed to work harder to give them confidence in capital markets – with just over half expecting regulators to lead the way – compared with 28% wanting investment advisers to take the lead and 13