CFA Institute, the global association of investment professionals, recently published Enhancing Investors’ Trust – the 2022 CFA Institute Investor Trust Study, the fifth in its biennial series, which measures trust levels and explores the factors that drive trust in financial services among retail and institutional investors in 15 markets globally. The study reveals that trust in financial services has reached an all-time high.
The study reveals five factors driving higher trust in financial services: strong market performance, fee compression, tech-enabled transparency, greater access to markets, and new personalized products. The study identifies increased use of technology as a major trust factor, simplifying investing by improving access to markets and information. Half of the retail investors and more than four-fifths of institutional investors say that increased use of technology has increased trust in their adviser or asset manager, respectively.
The study also finds that personalization is additive to trust, and advisers who understand their clients personally or provide investment products that align with clients’ values and beliefs, can deliver the most value.
William Tohme, CFA, Senior Regional Head, Middle East, and North Africa at CFA Institute said: “As one of the countries with the highest trust in financial services on a global level, the UAE’s path to a resilient and diversified economy has been marked with efforts to uphold the stability and integrity of the financial system.
The surge in trust we are currently witnessing is a positive indicator, and our latest report, Enhancing Investors’ Trust demonstrates how different factors have helped maintain and build investors’ trust, with technology, value alignment, and personal connections emerging as key determinants in a new, more resilient dynamic.
The millennial investor segment is championing technology and customization, exhibiting relatively high trust in ventures such as robot advice, digital apps, investment alerts, and digital nudges for seamless strategy execution. However, the face-to-face advisory remains a preference among three-quarters of investors, underscoring the importance of the human element – a notion which has remained consistent since the year 2020.”
- The proportion of institutional investors with high or very high trust in financial services has risen to 86% (65% in the prior survey). Among retail investors, trust levels are up to 60% (previously 46%).
- Trust in financial services has reached an all-time high, with India as the leading market with the highest trust level of 87%, the United Arab Emirates in the second place with 78%, and China in the third place with 76%.
- Millennial retail investors—and particularly those aged 25 to 34—are the most trusting of financial services (72% of this cohort have high or very high trust).
- For the first time, most retail investors globally (56%) envisage that in the next three years, access to technology platforms and tools through which they can execute their investment strategies will be more important than access to a human being for assistance. This reflects a steady shift in sentiment across 12 of 15 markets surveyed and resonates most loudly in India (90%) and the United Arab Emirates (84%).
- Two-thirds of institutional investors say they are now invested in cryptocurrencies. Globally, 32% of retail investors invest in cryptocurrencies, India leading with 67%, 66% in the United Arab Emirates, and 58% in Brazil. Overall, fewer than half of retail investors trust crypto currencies to hold their value (42%), compared to 84% of institutional investors, consistent with the different usage levels of crypto by these two groups.
- Advised investors are also more interested in personalized products (82%). Direct indexing (cited by 56%), personalized impact funds (53%), and artificial intelligence-driven investments (44%), are of the most interest to retail investors with advisers.
- Most institutional investors and most retail investors say technology increases their trust in their asset manager or adviser – due to more transparency, simplified access to markets and products, and personalization.
- Globally, 84% of institutional investors would invest in a fund that primarily uses artificial intelligence to select investment holdings, with a similar proportion (78%) believing that the use of AI in investment decision-making will lead to better investor outcomes. A lesser proportion of retail investors (39%) would consider AI-driven funds.