28 October 2016
The trust level among Hong Kong retail investors in the financial services industry has fallen, a recent survey shows. Photo: Xinhua
The trust level among Hong Kong retail investors in the financial services industry has fallen, a recent survey shows. Photo: Xinhua

Investors want transparency, ethics and performance

Investors are operating in a world where they want a “new normal”, based on an expectation that their managers should prioritize transparency and ethical standards.

No longer do investors simply demand returns from their managers, and no longer should managers dutifully oblige, collect their fees and live happily ever after.

The global financial crisis and its legacy have fundamentally changed the way investors interact with their managers and the demands they make of them.

CFA Institute recently undertook a piece of global research to understand what investors think and feel. Unsurprisingly, performance is still the key, but the expectations investors place on their managers are evolving rapidly.

Trust within the broader financial services industry is an ongoing battle, but within the investment profession a very clear picture of what we need to do to build trust has emerged.

Advisers must now ensure they keep ahead of the evolving needs of their clients.


This is not to say that performance is unimportant: 53 percent of retail investors polled in our 2016 From Trust to Loyalty survey still cite underperformance as the biggest factor that would lead them to switch firms.

It is worth noting that this coincides with another finding, namely that a third of retail investors globally believe that there will be a financial crisis within the next three years. Of those investors, half lack confidence in their firm’s ability to manage through a crisis.

Clearly there is a lack of confidence in the industry, which could lead to money being pulled out of funds and being stuffed back under the mattress.

We, as an industry, must showcase our ability to adapt to these volatile times, and having more information and greater transparency mitigates these concerns to some degree.


The good news is that trust in our industry is rising. Globally 61 percent of investors take a favorable view of financial services, up from 50 percent in 2013.

However, in Hong Kong, it’s not such a positive picture, as trust levels has fallen from 69 percent to 64 percent since 2013.

This is in stark contrast to regional neighbors, India and China, which exhibit the highest levels of trust at 90 percent and 89 percent respectively.

The data casts a long shadow over the state of the industry in Hong Kong, which has seen high levels of public discontent in recent years, spilling over into the deterioration of trust in the investment management industry.

This is often accentuated because the industry in Hong Kong, and globally, doesn’t spend enough time talking to the public and their clients, to understand how they can improve trust.


These results present an opportunity for the industry, as they allow us to focus on winning back the faith of investors, and build a more sustainable value proposition by identifying the services clients value most.

One of the keys to unlocking that process is understanding that investors require actions that actively demonstrate transparency.

This means clear, forthright communication; transparency around fees and risk; upfront conversations about conflicts of interest; and easily understood investment reports.

Simply put, today’s investors want better quality information, not more information.

Transparency and consistent communication are more important than ever in the client relationship.

These expectations have only risen following increased regulatory and media scrutiny of industry conduct and the availability of information from new technology platforms.

The biggest disparities between what an investor expects and what they receive relate to fees and performance, with 79 percent of global retail investors calling for more clarity around fees and, crucially, for them to be agreed upon before they are charged.

Clients need full disclosure on charges and to feel confident that they fairly reflect the value they are getting from their investment firms.

Only by addressing these needs will investment managers be able to deepen trust and, critically for the future of their industry, articulate their value proposition.

Human interaction versus fintech

When looking to the future of the industry, emphasis often focuses on the rise of fintech and “robo-advisers” versus human interaction.

In Hong Kong, when looking ahead three years, 60 percent of retail investors state they would prefer to have a person to navigate and execute their investment strategy, while only 40 percent opt for a “robo-advisor” option.

However, the majority of retail investors in India (64 percent) and China (55 percent) and half of investors in Singapore, believe having access to the latest tech platforms and tools are the most important in executing their investment strategy.

While this seems like a surprising contrast to Hong Kong, when you overlay investment demographics, investors in newer Asian markets tend to be younger, so are more prone to using online sources and technology.

Compared to more established markets, particularly in the West, there are also fewer options in terms of products and content available through investment management companies.

The focus on future investment technology in newer Asian markets is a challenge for global investment management companies, particularly with the rapid rise of fintech start-ups, and the finding that 45 percent of institutional investors and 43 percent of retail investors would leave an investment firm if data security were to be compromised.

However, it also presents an opportunity. If global organizations are able to think creatively about the products they’re developing, and how to use fintech to bring them to Asia’s vast populations, they will have a higher likelihood of increasing penetration.

Fundamentally, it still comes down to financial professionals putting investors’ interest before their own, demonstrating the highest standards of competency and ethics and advancing the profession to better serve individuals and society at large.


Investors want advisers they can trust and who have their best interests at heart. They expect greater transparency and communication, especially during periods of market volatility.

Increased levels of care are particularly necessary during downturns, and in this digital age, a lack of reliable security measures to protect investors’ data can drive investors to switch advisers.

It is incumbent upon those of us in the investment profession to listen to what investors are telling us they want, and to ensure that our profession continues to evolve and develop the tools necessary to earn their trust.

Only through this can we do what we do best – help them to achieve their investment goals.

– Contact us at [email protected]


President and CEO at CFA Institute

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