A new global survey of investors finds that confidence in the investment industry is weak, with a little over half of investors saying that they trust investment firms.
According to a study that surveyed over 2,000 investors in Canada, the U.S., U.K., Hong Kong, and Australia, published today by the CFA Institute, just 53% of investors say they trust investment firms to do what is right. Retail investors are less trusting of the industry (51%) than institutional investors (61%), it notes; and investors in the U.S. (44%) and UK (39%) are particularly skeptical.
The survey also found that 55% of investors report that the individual investment managers they work with have been the most effective in enhancing their trust in the capital markets; making them more important than firms (41%), local regulators (38%) or global regulators (35%). However, in the future, investors expect government to help build trust in capital markets, they say, adding that 52% see regulators as having the greatest opportunity to enhance trust.
Notwithstanding the lack of trust in the investment industry, the survey also finds that nearly 75% of investors say they are optimistic about their ability to earn a fair return in capital markets. Although just 19% ‘strongly agree’ that they have a fair opportunity.
“This survey sends a clear message. Trust is absolutely critical to the future of finance, and it is up to all of us to help shape a more trustworthy financial system,” said John Rogers, president and CEO of CFA Institute.
“Investors believe the professionals they work with have been the most effective in earning their trust. This represents a significant opportunity for investment professionals and firms to actively build a culture where ethical practices are valued as highly as investment performance,” notes Rogers.
Additionally, the study finds that a commitment to put investors’ interests first is critical to building trust. It says that investors report that trusting an investment manager to act in their best interest is the single most important factor in making a hiring decision, with achieving high returns and fees cited as much less important.
“Investors also indicate that behavior-related attributes – including transparent and open business practices, responsible actions to address an issue or crisis and ethical business practices – are more important to trust-building than performance-related attributes such as delivering consistent financial returns and offering high quality products or services,” it says.
The survey polled 2,104 retail and institutional investors in North America, Europe, Asia and Australia, and was conducted online from June 7 to June 25, by Edelman Berland, a market research firm.