More than half of retail investors distrust the financial industry

Only one in ten believe that financial advisers always put their clients first.

Less than half (47%) of Singapore retail investors completely trust the financial services industry, making the country the third lowest amongst 12 when it comes to trust in the sector, CFA Institute revealed. It just followed Australia (31%) and Hong Kong (35%).

Moreover, the survey also revealed that only one in 10 retail investors in Singapore believe that financial advisers always put their clients first, compared to 35% of global respondents. The only market where this was lower was Hong Kong (7%).

These investors are more demanding that persons or businesses continually earn their trust and maintain it over time (52%) compared to global respondents (46%). "In particular, continued education for advisers was highlighted by respondents as crucial to gaining this trust as three-quarters of Singapore retail investors surveyed said that they would be more trusting of investment firms that promote continuing professional development," it added.

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CFA Singapore advocacy committee member Maurice Teo commented, “This Trust Survey is a wakeup call for the financial services industry to come together and build stronger confidence and trust amongst investors. Even as the financial services industry continues to tackle emerging technologies, evolving regulations and challenging market conditions, investment practitioners need to heed these results and rebuild credibility and professionalism through a focus on competence, care and ethics to rectify the situation."

In Singapore, three important criteria for retail investors to build a trusted relationship with an investment adviser are: fees that reflect the value they get from the relationship (72%), generates returns similar to or better than a target benchmark (71%), and employs investment professionals with credentials from respected industry organisations (66%).

Trust was consistently reported as the greatest determinant in selecting a financial adviser and is evident in 37% of respondents saying that the most important attribute is for advisers to be trusted to act in their clients’ best interests, a rating even higher than the ability to achieve high returns (22%).

For retail investors in Singapore, 59% stated that the lack of communication or responsiveness was the top reason they would switch firms and advisers. Other reasons include underperformance (56%), data or confidentiality breach (36%), and increase in fees (34%).

Given the importance of communication, CFA Institute noted that only 49% of investors in Singapore said their adviser is very accessible for questions or concerns, significantly lower than 75% globally.

Moreover, 42% of retail investors in Singapore fear a financial crisis and believe one is likely to occur within the next three years. "A low percentage of Singapore retail investors (41%) believe their advisers are well or very well prepared to handle the next crisis, which they see being caused by national and global politics, cryptocurrency or tech stock bubbles, or terrorist attacks," the institute added.

Retail investors in Singapore were also the most sceptical respondents regarding market fairness with only 54 percent believing they have a fair opportunity to profit in capital markets, compared to 69 percent globally.

“We are surprised to see low trust levels within the financial services industry this year, despite ongoing regulatory reforms since the global financial crisis. The industry is fundamentally about trust and the relatively low score on trust of Singapore retail investors shows that their trust is shaken,” Teo added.

Moreover, nearly three in five retail investors (57%) are fine replacing human advice with tech tools to execute their own strategy in three years, significantly higher than 48% globally, CFA Institute revealed. However, only 11% stated that they are currently more trusting of robo-advisers than human advisers, whilst 39% said increased use of technology has made them trust their advisers more.