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Trust in tech does not signal death of the IFA

Trust in tech does not signal death of the IFA
Photo: Vlada Karpovich via Pexels

Technology is a main driver of trust in financial services but not at the cost of the personalised, human touch, according to a study of retail investors globally.

The latest CFA Institute Investor Trust Study has found access to the latest technology will become more important than access to a human being who can help them invest.

According to the 25-page study, Enhancing Investors’ Trust, trust in financial services has reached an all-time high.

For the first time, most retail investors (56 per cent) envisaged 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. 

But while the human element of financial services transactions was less important among the five factors driving higher trust - 60 per cent for retail investors and 80 per cent for institutional investors - this was not seen as a replacement for the human touch.

Half of retail investors and more than four-fifths of institutional investors said increased use of technology has increased trust in their adviser or asset manager, respectively. 

The survey said the five factors driving greater trust were:

  • Strong market performance
  • Fee compression
  • Tech-enabled transparency
  • Greater access to markets
  • New personalised products.

However, this did not mean the death of the financial adviser - far from it. 

The study found the importance of understanding clients on a personal level, and providing them with products that align with their values and beliefs, "cannot be understated".

Globally, 40 per cent of retail investors said it was important to have an adviser who shares their values.

Almost twice the number of retail investors with advisers (58 per cent) said they were interested in trying new investment products compared to investors without an adviser (37 per cent).

Advised investors were also more interested in personalised products (82 per cent) and are willing to pay additional fees for customisation (62 per cent).

The study also finds that personalisation was additive to trust, and advisers who understand their clients personally, or provide investment products that align with clients’ personal values and beliefs, can deliver the most value.

Rebecca Fender, CFA, head of strategy & governance for research, advocacy and standards at CFA Institute, and lead author of the Trust Study, said: “The highs we’re now seeing in investor trust are certainly cause for optimism, but the challenge is sustaining trust even during periods of volatility."

The fifth in the biennial series of studies from the CFA Institute canvassed the opinions of 3,588 retail investors and 976 institutional investors across 15 countries between October and November 2021.

It also found that technology, the alignment of values, and personal connections are all coming through as key determinants in a resilient trust dynamic.

The millennial effect

Fender said: "The under-44s, and particularly millennials, are leading the way in their use of technology and in their desire for personalised products.