"The survey shows that investors believe that the fund industry is falling short in meeting their needs, at a time of great economic uncertainty and market volatility," said Lee Kranefuss, CEO of iShares at BGI.
The survey, "Measuring Affluent and High Net Worth Investor Expectations of the Investment and Financial Community," was conducted by Cogent Research, an independent market research firm, to measure the attitudes and expectations of investors toward a wide range of issues including level of trust and satisfaction with the fund industry, financial advisors and the media, as well as their personal confidence, understanding and engagement in their investments. The survey was commissioned by iShares Funds, the largest provider of exchange traded funds and a division of BGI, one of the world's largest asset managers.
Approximately 71% of respondents either lack trust or are uncertain as to whether to trust the fund industry, and only 34% believe that the fund industry takes responsibility for investors' financial well-being. A majority of investors (81%) believe that the industry should put the needs of investors first. Fund industry dissatisfaction among the individuals surveyed is driven by issues such as perceived lack of value and transparency for the fund fees they pay and the belief that risks relative to investment returns and potential tax implications are not clearly articulated.
Nearly three-quarters (72%) of investors consider their advisors to be champions of their investment interests. Additionally, only 9% of advised investors are at all likely to change their advisor in the next year.
"This survey should be a clarion call to all of us in the fund industry. While there is a strong trust and bond between investors and their financial advisors, this good news is tempered by a noteworthy mistrust of the fund industry as it relates to a lack of transparency and not providing a clear understanding of investment risks and taxes," said Lee Kranefuss.
"The investment industry serves the goals and aspirations of millions of investors. At BGI, we try every day to be investor focused and our reputation is built on our clients' trust. The survey clearly indicates the need for all of us in the fund industry to be better, and it's the fiduciary responsibility of all of us to address the needs of investors and their financial advisors to help them make more informed investment decisions."
The study findings also indicate that:
- The media doesn't help matters, with 73% of those surveyed saying that the media sensationalizes certain issues or trends and only 19% believing that the media provides accurate reporting. Only two in ten investors say that the media does a good job of recognizing the importance of tax implications and fees on investment returns.
- A paradox exists between investor confidence and their reported investment knowledge. While 87% of investors say that they understand the level of risk in their portfolios, less than two-thirds can confidently say they understand how the financial markets work or can communicate the purpose of each investment in their portfolio.
Kranefuss continued, "We believe that transparency is a key factor in helping investors become more knowledgeable about their investments and building trust. The survey findings show that investors expect a high level of transparency as it relates to fees, risks, investment returns and tax implications. Thus, we felt it was important to do this survey and to have our new ad campaign, which launched last week, raise awareness of industry flaws, provoke thinking and encourage more truth, clearer investment decisions and responsible actions on the part of fund providers, financial advisors and investors."
