More than 84 percent of investors would trust investment advisors more if they fully disclosed fees and costs, but only 48 percent are satisfied they’re currently getting this critical information, according to research from the CFA Institute that looks at range of factors impacting investors’ trust.
Results of the CFA Institute’s survey, which asked investors how investment professionals can better increase trust with them, are contained in “The Next Generation of Investor Trust,” is available at https://nextgentrust.cfainstitute.org/.
The fee satisfaction gap “doesn’t mean clients think they’re paying too much; they don’t understand what they pay,” said Bob Stammers, CFA Institute’s director of Investor Engagement on the Future of Finance.
“In some cases, clients don’t have a lot of knowledge about fees or conflicts of interests and it is up to advisors to have these conversations,” Stammers told a crowd of investment advisors who attended the “Leadership through Fiduciary” seminar in Philadelphia, October 15. The event, sponsored by the Institute for the Fiduciary Standard, was designed to help fee-only fiduciary advisors explain and market their value proposition.
Advisors, however, have told CFA that they don’t like to bring up fees unless clients ask, Stammers said.
A majority of investors (74 percent) also reported that they want their investment professionals to charge “fees that reflect the value I get from the relationship,” but only 44 percent were satisfied they were getting value for their money.
Investors’ satisfaction gap extends to investment professionals’ conflict-of-interest disclosure and management, the CFA survey of 3,000 retail investors found. While 80 percent of investors believe their investment professional should be “forthright about disclosing and managing conflicts of interest,” only 43 percent were satisfied their professionals were doing a good job with conflicts.
Performance is another nagging area impacting investors’ trust. Some 78 percent of investors said they wanted their professional to generate returns similar to or better than a target benchmark, but only 44 percent said they were satisfied with performance, the CFA reported.
Advisors also have a credibility gap when it comes “reliable security measures to protect my data,” with 84 percent of investors rating that as a critical measure of their trust and only 55 percent reporting satisfaction with advisors’ security measures.
Worth noting on credentialing matters: Some 77 percent of investors said they trust firms that employ investment professionals with credentials from respected industry organizations, while only 51 percent are satisfied with their current advisor’s credentials.