Investments  

Markets 'fairer' for advised clients

Markets 'fairer' for advised clients

Advised clients are more likely to feel they have a “fair opportunity” to profit from investing than consumers without an adviser, research has shown.

Data from the CFA Institute, published this week (June 22), showed while 57 per cent of retail investors without an adviser said they had a fair opportunity when it came to putting their cash in capital markets, some 81 per cent of advised clients felt the same.

The CFA Institute polled 3,525 investors in Q1 this year and found trust levels in the industry also varied depending on whether the consumer had an adviser or not.

Some 57 per cent of those with an adviser trusted the financial services industry while just a third (33 per cent) of retail investors without an adviser thought the sector was trustworthy.

Alistair Fullerton, director at Lathe and Co, said: “The financial services sector has a bad reputation from past misdemeanours, the global financial crisis and even films like Wall Street and Wolf of Wall Street. 

“Coupled with that, it can be a confusing landscape where people can lose real money — so it culminates in a lack of trust. Having a good adviser is like having a chaperone or even financial bodyguard.”

But Shelley McCarthy, managing director at Informed Choice, thought the findings were more likely the result of education provided by the adviser.

She said: “If you understand what you are investing in and why you are investing, you are more likely to agree that you have a fair opportunity to profit from investing.”

The institute’s report, entitled Is the Coronavirus Rocking the Foundations of Capital Markets?, also looked at what investors thought the coronavirus crisis' economic recovery would look like.

Some 75 per cent of the 13,300 investment management professionals polled in April dismissed the optimistic murmurings of the financial sector about a ‘V-shaped recovery’ post-pandemic.

Instead 44 per cent thought there would be a medium-term ‘hockey stick’ recovery, where there is some level of stagnation for the next two to three years.

Another 31 per cent predicted a slow U-shaped recovery, which would indicate three to five years of moderate pick-up in activity before clearer signs of acceleration.

The report said: “Most respondents globally and in the UK sit at the conservative end of the spectrum, in comparison to several industry and banking CEOs, who have so far appeared more optimistic.”

Respondents agreed overwhelmingly that the crisis could result in specific asset mispricing. Some 96 per cent thought assets would be mispriced, mainly because of liquidity dislocation (38 per cent) and distortion of natural market pricing (39 per cent).

In terms of regulation, just 22 per cent thought conduct rules should be relaxed to encourage trading and liquidity, with 77 per cent of those polled suggesting regulators should actively seek the appropriate response through consultation with the industry.

There was also concern over ethical behaviour in the sector. Some 45 per cent of UK CFA members thought it was likely the crisis would result in unethical behaviour, with 30 per cent of respondents neutral and 29 per cent disagreeing.