There is no disputing the value of technology. But the picture is nuanced. The increased appetite for tech is entirely among the 25–34 age group, while other generations are showing less appetite or just maintaining the status quo.
Since 2018, the CFA found that the preference for technology has dropped in six of the 15 markets, including the US, Brazil, France, Singapore, mainland China, and Hong Kong. Still there is growing interest in more customized products, where nearly half of all retail investors—especially younger ones— said they would pay more for customization.
Trust and returns
Among institutional investors, returns have become even more important in hiring an investment firm than having someone trusted to act in their best interest. Low interest rates have piled pressure on return expectations, particularly for pension funds.
But it is different for retail investors, who still "prioritize having someone trusted to act in their best interest and a recommendation from someone they trust when looking to hire an advisor, with an assumption that returns will follow," the report said, adding the caveat that managers took the survey while still in a bull market.
Persistent self interest
Few across institutional and retail believed that firms put clients’ interests before their own (35 per cent and 25 per cent respectively), in spite of the fact that 75 per cent of retail investors believed that their advisor is legally bound to act for them before themselves. Also, in spite of a steady stream of new tools connecting clients with advisors, perceptions around transparency are not improving.
Role of fees
Retail and institutional investors agreed that one of the most important factors for creating trust is full fees and costs disclosures, but there was little confidence in those conversations becoming more open. That said, around three-quarters believe that the fees they pay are fair, even as the survey showed that high fees are one of the main reasons that investors give for leaving a firm. Not just disclosing but explaining fees and costs is an important way of building trust and hanging on to clients in these difficult markets.
Rise of brands
Brand was increasingly mentioned as a marker of trust, especially among younger investors. Three quarters of younger investors said they would rather work with a firm with “a brand I can trust” than one with “people I can count on.”
Roughly half of retail investors without an advisor thought they had a fair chance of profiting from capital market investments, compared with 81 per cent for those with an advisor, suggesting that there is a market to win over.
The CFA underscores that everyone is scrambling to “adapt” but "those with a trusted relationship are much better equipped to navigate disruption.”
Not surprisingly, institutional investors were the most keen on investing in funds that use artificial intelligence, and nearly half of early adopters were interested in investing in products created by a big tech firm such as Amazon, Google, or Alibaba over those produced by a financial institution.
ESG is also rising in priorities, with over two-thirds in both camps expressing an interest. Two-thirds of institutional investors believe that the growth of ESG investing has increased trust in financial services as a whole.