Trust in the financial services sector has reached an all-time high, with India topping global markets with investors showing 87 percent of trust in the market, and the UAE coming in second with 78 percent levels of trust, followed by China in the third place with 76 percent, according to a report published by the CFA institute.
The CFA Institute, which is a global association of investment professionals, recently published its Enhancing Investors’ Trust – the 2022 CFA Institute Investor Trust Study, the fifth in its biennial series, which measures trust levels and explores the factors that drive trust in financial services among retail and institutional investors in 15 markets globally.
The study reveals five factors driving higher trust in financial services: strong market performance, fee compression, tech-enabled transparency, greater access to markets, and new personalised products.
The senior regional head for the Middle East and North Africa at CFA Institute, William Tohme, said: “As one of the countries with the highest trust in financial services on a global level, the UAE’s path to a resilient and diversified economy has been marked with efforts to uphold the stability and integrity of the financial system.”
Trust in financial services: Institutional and retail investors
The proportion of institutional investors with high or very high trust in financial services has risen to 86 percent, from 65 percent in the prior survey. Among retail investors, trust levels are up to 60 percent, compared to previous figures of 46 percent.
Half of retail investors and more than four-fifths of institutional investors say that increased use of technology has increased trust in their adviser or asset manager, respectively.
The study identifies increased use of technology as a major trust factor, simplifying investing by improving access to markets and information.
For the first time, a majority of retail investors globally – up to 56 percent – envisage 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.
This reflects a steady shift in sentiment across 12 of 15 markets surveyed and resonates most loudly in India (90 percent) and the UAE (84 percent).
Impact of personalisation of financial services
The study also finds that personalisation is 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.
Advised investors are also more interested in personalised products (82 percent). Direct indexing (cited by 56 percent), personalised impact funds (53 percent) and artificial intelligence-driven investments (44 percent), are of the most interest to retail investors with advisers.
The surge in trust we are currently witnessing is a positive indicator, and our latest report, Enhancing Investors’ Trust demonstrates how different factors have helped maintain and build investors’ trust, with technology, value alignment, and personal connections emerging as key determinants in a new, more resilient dynamic.
Interest in cryptocurrencies and AI
Two-thirds of institutional investors say they are now invested in cryptocurrencies.
Globally, 32 percent of retail investors invest in cryptocurrencies, India leading with 67 percent, the UAE with 66 percent, and Brazil with 58 percent.
Overall, fewer than half of retail investors trust cryptocurrencies to hold their value (42 percent), compared to 84 percent of institutional investors, consistent with the different usage levels of crypto by these two groups.
Globally, 84 percent of institutional investors would invest in a fund that primarily uses artificial intelligence to select investment holdings, with a similar proportion (78 percent) believing that use of AI in investment-decision-making will lead to better investor outcomes. A lesser proportion of retail investors (39 percent) would consider AI-driven funds.
Millennial investors
The millennial investor segment is championing technology and customisation, exhibiting relatively high trust in ventures such as robo-advice, digital apps, investment alerts and digital nudges for seamless strategy execution.
Millennial retail investors — and particularly those aged 25 to 34 — are the most trusting of financial services, with 72 percent of this cohort stating that they have high or very high trust.
However, face-to-face advisory remains a preference among three-quarter of investors, underscoring the importance of the human element – a notion which has remained consistent since the year 2020.
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