Investors have trust issues with financial advisers

New research by the CFA Institute found that people’s trust in financial advisers falls short. 

In a survey of 3000 retail investors, the institute found that trust is driven by full disclosure of fees (84 per cent), disclosure and management of conflicts of interest (80 per cent) and generating returns better than a benchmark (78 per cent).

However, financial advisers are perceived to fall short in all these areas, as only 44 per cent of participants say that advisers deliver satisfactorily on these. In addition, only 48 per cent trust them to disclose all of their fees. 

Paul Smith, CFA president and CEO of CFA Institute, says: ‘Higher trust comes with higher expectations, and we are not there yet until we can consistently prove our value to clients by providing solutions, not simply products.’  

Crucially, he added: ‘We need universal disclosure of fees and performance to drive home this message.’

The survey also found that the main reasons for why people leave their financial advisers are underperformance (57 per cent) and lack of communication or responsiveness (51 per cent). 

-Fund investors should be in the cheapest share class 

On the upside, 64 per cent of investors said it increases their trust when their investment firm adheres to a voluntary code of conduct for the industry.

‘These findings provide a roadmap for how our industry can increase its credibility and address investor concerns,’ says Rebecca Fender, CFA and head of the Future of Finance initiative at CFA Institute. 

Due diligence is an important part of selecting a financial adviser, as this is a person that you will entrust with a lot of information about yourself, both financial and personal. 

-A beginner’s guide: how to find a financial adviser 

Meanwhile, it is worth remembering that other industries also face low levels of trust. For instance, trust in government remains very low at 36 per cent, according to the Edelman Trust Barometer.

Further, less than a quarter of the UK population, trusts social media companies are doing enough to prevent the sharing of extremist content, cyberbullying and illegal or unethical behaviour. 

Keep up to date with all the latest personal finance news and investment tips by signing up to our newsletter. Email subscribers will also receive a free print copy of Money Observer magazine.

Subscribe to Money Observer Magazine

Be the first to receive expert investment news and analysis of shares, funds, regions and strategies we expect to deliver top returns, plus free access to the digital issues on your desktop or via the Money Observer App.

Subscribe now

Add new comment