The CFA Institute’s ‘Investor Trust’ study revealed that only a third of British investors had faith in the financial services industry, compared with 45 per cent in the US and 68 per cent in Hong Kong.
More than half, 53 per cent, of retail investors across all these regions, as well as Canada and Australia, believed investment firms “do the right thing”, according to the eight-page report. But that percentage plummeted in the UK to just 7 per cent, lower than in the US (13 per cent) and Hong Kong (21 per cent).
Of the 2,100 investors polled for the study, more than a third, 35 per cent, ranked trustworthiness as the most important factor in picking an investment manager, compared to 17 per cent who valued a record of achieving high returns. Only 7 per cent cited fees as the most important consideration in selecting an investment manager.
Encouragingly, more than half, 55 per cent, of investors believed individual managers had made the most impact in restoring trust, over and above investment firms (41 per cent), national regulators (38 per cent) and global regulators (35 per cent).
Fifty-three per cent, expected investment managers to be more honest about successes and failures within their funds, with a similar number wishing to see more straightforward reporting and compliance with voluntary codes of ethics across the sector.
The CFA, a worldwide body aimed at upholding ethical standards in the investment industry, has drawn up a three-point plan to restore trust to the sector, including calls for more transparent fees that are commensurate with performance.
Rhodri Preece, director of capital markets policy at the CFA in London, said the majority of EU members regarded mis-selling of inappropriate investment schemes among advisers as its “top ethical concern” in the financial sector.
Speaking at a CFA event in the City on 15 August, Mr Preece said: “The wave of mis-selling scandals right across the investment sector has been traced back to the fact that investors lack information to make informed decisions. More work must be done in driving transparency, understanding investors’ behaviour and improving the quality of information given.”
Kurt Schacht, managing director of standards and financial market integrity at the CFA Institute, said: “Investors indicate in this study that they want a culture shift – a renewed focus on ethical behaviour. Individual investment managers must be transparent, demonstrate integrity, and communicate clearly to strengthen client relationships and preserve trust in the industry and the markets at large.”
|Fiona Sharp, senior adviser at Norfolk-based Almary Green, said: “There has been a dip in trust, particularly because the RDR has laid the charges out so starkly, but in the long term, that trust will recover because the illustrations are getting clearer and firms are being more honest with people.”|