Canadian retail investors are less trusting of the financial services sector than they were only three years ago, according to a global study released by the New York-based CFA Institute on Wednesday entitled From Trust to Loyalty: A Global Survey of What Investors Want.
Although, Canada’s financial services sector is still the most trusted of the five markets surveyed in the 2013 and 2015 editions of the report, it dropped by 12% within those two years. In contrast, the level of trust for the financials services sectors in the U.S., the U.K. and Australia rose. As for Hong Kong, its financial services sector saw a slight decrease in trust, according to the report’s findings.
The overall increase in the trust felt toward financial services is a good thing, but the report indicates there are multiple “deal-breakers” that financial professionals need to consider, according to Paul Smith, CEO of the CFA Institute.
“Performance is no longer the only ‘deal-breaker’ for investors. They are continuing to demand more clarity and service from financial professionals and, with the rise of robo-advisors, they have more alternatives than ever before,” says Smith in a statement.
Although robo-advisors are becoming a more well-known option for Canadians, it seems retail investors in this country are more likely to hold onto their financial advisors. Four-fifths (81%) of Canadians surveyed state they will continue to prefer having a human financial advisor guide them in executing their investment strategy as opposed to using the latest robo-advisor technology tools. However, fewer retail investors in the U.S. (73%) and the U.K. (69%) felt the same way.
Canadian financial services professionals may also want to take note of some of the global findings about where retail investors are looking for improvements in the process of receiving financial advice.
Specifically, 80% of retail investors globally indicated that the most important attribute they look at in their investment firm is that the firm makes clients aware of the fees they are being charged. However, investors’ satisfaction with their firms in this area is much lower, at only 50%.
Another area in which retail investors are calling for more clarity is in understanding why their portfolios are allocated the way they are. Although 70% of retail investors around the world expect these explanations, only 46% say their investment firms are delivering on this adequately.
This should be of paramount importance for advisors as underperformance within a portfolio is still important, as it was the most popular reason (53%) for why investors, globally, would leave their investment firms. The other two most popular reasons why clients would leave their investments firms are because of an increase in fees (46%) and a data or confidentiality breach (43%).
Retail investors surveyed were also anxious about the state of the global economy, with one-third of global survey participants believing there will be another financial crisis within the next three years. In Canada, one-quarter of retail investors believe this to be the case.
Edelman Berland conducted the research for this report between Oct. 19 and Nov. 11, 2015. The online survey sampled 3,312 retail investors who 25 years old or older and had investible assets of $100,000 in Canada, the U.S., U.K., France, Germany, Australia, India, Singapore, China and Hong Kong. It also sampled 502 institutional investors with assets of $10 million or more in Canada, the U.S., U.K., Singapore, Australia and Hong Kong.