Latest technology and tools are crucial to devise a winning investment strategy, says Porwal
Five factors are driving higher trust in the Indian financial services such as strong market performance, fee compression, tech-enabled transparency, greater access to markets and new personalized products, says a study providing industry valuable insights into the changing landscape of investor relations globally and in India.
“A critical aspect is that retail and institutional investors are demanding cutting-edge technology for making trustworthy investments,” said Arati Porwal, Director Society Relations, CFA Institute, a global association of investment professionals.
“India Inc is witnessing a digital revolution with 90% of respondents of the opinion that the latest technology and tools are crucial to devise a winning investment strategy,” said Porwal in comments on ‘Enhancing Investors’ Trust’ – the 2022 CFA Institute Investor Trust Study.
“Another interesting finding, particularly for the Indian market, is the high and growing interest in cryptocurrencies, which is a testimony to the country’s young investor profile with a higher risk appetite, readiness in adopting virtual digital assets and a positive outlook.”
Some major insights from the Trust Study 2022 are:
• A majority of Indians (73%) believe in recommendations from a human adviser as compared to robo-advisers. This shows the importance of human intervention in the field of financial investments
• Half (49%) of the Indian institutions do not rule out the possibility of financial crisis in the next 3 years, which is an important indicator to help move ahead with cautious optimism
• 88% of Indians opt for a trusted brand to work with when choosing their investment advisor, which reiterates the need for relationship building and reputation
• Among retail investors, trust levels are up to 60% from previously 46%. Retail investors are now more trusting in all markets except India, where trust is at 83% as compared to 87% previously. This still makes India one of the top markets for trust in financial services
• Even though Indian retail investors are leading in their trust levels in crypto, institutions are behind as more than half of them do not yet provide crypto related investment resource
• When it comes to ESG, 29% of institutions are investing in community involvement while 27% of institutions believe the need to invest in sustainable supply chain management.
“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,” said Rebecca Fender, Head of Strategy & Governance for Research, Advocacy and Standards, CFA Institute, and lead author of the Trust Study.
“Our ongoing examination of the dynamics required to build and maintain investor trust reveals what investors need from their advisors and managers through the highs and lows of market cycles. Technology, the alignment of values, and personal connections are all coming through as key determinants in a resilient trust dynamic.
“The under-44s, and particularly the millennials, are leading the way in their use of technology and in their desire for personalized products. This investor cohort has a relatively high trust in robo-advice, digital apps and digital nudges, and are using online platforms to execute their investment strategies,” Fender said in a release on 25 Apr 2022.
“Our country has set itself an ambitious target of becoming a US$5 trillion economy but the lack of financial literacy and slow technology adoption can put us off track,” said Rajendra Kalur, Chairperson of CFA Society India.
“Increasing retail investor awareness that will enhance trust in the sector is the only way to grow the sector. The role of financial advisers becomes very crucial at such times as they act as the support system to the retail investors and help in the growth of the industry. As seen in CFA Institute’s Trust Study 2022, more than 50% retail investors with advisers are willing to try new investment products.
“The study provides some deep insights like these that can help the sector better understand the rapidly evolving trends and align itself accordingly,” said Kalur.
CFA Institute published its fifth biennial ‘Enhancing Investors’ Trust’ – the 2022 CFA Institute Investor Trust Study, which measures trust and explores the factors that drive trust in financial services in both retail and institutional segments in 15 markets globally. The study found that trust in all industries – including financial services – has risen to new highs.
On behalf of CFA Institute, Greenwich Associates conducted an online survey of 3,588 retail investors and 976 institutional investors in October and November 2021. Markets included were Australia, Brazil, Canada, China, France, Germany, Hong Kong SAR, India, Japan, Mexico, Singapore, South Africa, the United Arab Emirates, the United Kingdom and the United States.
Retail investors surveyed were 25 years or older, with investible assets of at least US$100,000, except in India, where the minimum investible asset level was Rs.500,000. Institutional investors included those with responsibility for investment decisions with assets under management of at least US$50 million, as well as public and private pension funds, endowments and foundations, insurance companies, and sovereign wealth funds. The margin of error for total retail investors is 1.6% and for total institutional investors is 1.9% at a 95% confidence level.
CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion of ethical behavior in investment markets and a respected source of knowledge in the global financial community. fiinews.com
