You would appreciate that trust is one of the most important factors in any relationship. Similarly, when investors approach financial advisors to build wealth and accomplish financial goals, effectively, they are looking for a ‘Financial Guardian’, who is a symbol of Trust and Respect.

This, in turn, empowers investors to take a calculated risk with their hard-earned money.

The CFA Institute, the global association of investment management professionals, conducted its 4th global trust survey recently. The CFA Institute interacted with 3,525 individual investors across 15 geographies and 921 institutional investors. The threshold for selecting respondents was investible assets of US$ 100,000 in case of individuals and US$ 50 million for institutional investors.

In the Indian context, only HNIs could have qualified to respond to the survey. That said, there is no harm in understanding survey findings even if you deal with retail investors. As you know, awareness among retail investors in India is growing, plus they are equally cautious about the quality of service.

Here’s what the survey reveals…

  • 60% individual investors trust the technology industry while only 46% trust the financial services industry.
  • Only 23% respondents have a high level of trust in the financial advisors, and another 46% respondents have a medium level of trust; the rest don’t have much faith in the community of financial advisors.
  • 78% Indian respondents are expecting a financial crisis in the next three years.
  • In the Asia-pacific region, only 38% respondents had Retirement as their highest priority goal.
  • 60% of individual investors, who take the help of an advisor, find it easy to read and understand the investment reports prepared by asset management companies, while only 32% investors that do not consult any advisor are comfortable reading those reports themselves.
  • 53% individual investors think their advisors charge them an appropriate fee.
  • 48% investors believe the advent of technology in the financial advisory has helped them trust their advisor more. This proportion is higher (73%) among investors below 35 and (64%) among below 45.
  • Overwhelming 92% Indian respondents said that they are looking forward to have access to the latest technology platforms and tools to execute their investment strategy in the next three years.
  • 82% Indian investors trust human advisor more than the robo-advisor.
  • Just 36% individual investors think they will invest in a fund that primarily uses artificial intelligence to select investment holdings
  • Individual investors consider underperformance and high fees as the biggest factors for discontinuing the services of the financial advisor.
  • A third of investors believe trust in the financial advisor—that she/he would act in their best interest—is the most important factor for them to hire an asset manager.
  • 90% Indian investors think trust comes with a brand promise. In other words, they would rather believe in brands they can trust rather than people they can count on.
  • 59% individual investors believe their financial advisor is their most trusted source of investment advice.

If you have observed carefully, investors consider trust, performance, and fees (in this order) as important factors to work with an advisor and to obtain their services.

Moreover, a growing number of people are looking to take aid from technology platforms for advice, investment strategies, and to execute their investments transactions. However, very few want to run their investments on auto-pilot.

Considering the hierarchy of goals, investors are bound to seek expert help in the future, provided they get a trustworthy advisor.

The CFA Institute argues, and rightly so, that trust has two facets:

  • The willingness of investors to trust the advisor and the financial institution; and
  • The worthiness of advisors and financial institutions to be trusted.

The second part is largely a function of credibility and professionalism you as a financial advisor follow. If the advisor is impeccable at it, willingness to trust from the investors’ side will surely follow.

Do your investors find you credible?

You can’t build trust in one day. You constantly work towards building it over a period of time, in such a way that it adds to your goodwill.

Trust can only be built on the foundation of integrity and perhaps, that’s the way to carve a niche and grow in the investment advisory business.

“To give real service you must add something which cannot be bought or measured with money, and that is sincerity and integrity.” – Douglas Adams (an English writer, humourist and dramatist)

As an investment advisor, it is imperative to distinguish yourself from the crowd by standing for honest and ethical advice. This is because investors, in general, are fed up of the rampant mis-selling tactics.

The regulators are keenly protecting the interest of investors, there are regulations in place of course. But being ethical has to come from within and is much wider and deeper from the purview of the law.

Investors expect you to be transparent, follow the best disclosure norms, hope for confidentiality, and expect valuable unbiased advice with superior portfolio performance. Credibility builds trust and performance often helps build more credibility.

So, adopt the best business practices and follow high fiduciary standards. Keep engaging and communicate, with your clients/investors to keep them informed on the health of their investment portfolio and educate them. Keep this communication very clear, effective, and professional.

Going by the survey results, specifically, the investor’s preferences, as a financial advisor, you would be better off adopting technology in your advisory practice.

Some benefits of embracing technology to you and your clients/investors are as under:

  • ✓ Less  paperwork      
  • ✓Save time
  • ✓ Offer flexibility and convenience in transacting
  • ✓ 24X7 connectivity
  • ✓ No biased in favour of or against specific investment options
  • ✓ Greater transparency in operations
  • ✓ Quick response  system
  • ✓ Extremely cost-effective for investors as well as advisors
  • ✓ Less paperwork helps make the most productive use of spare time to keep up with the latest developments in the field of investing and finance and technology

To become more competitive and effective in your advisory, you may take advantage of Certified Financial Guardian (CFG) — an online platform presented by Quantum Cosmos (a Quantum Mutual Fund partner initiative along with PersonalFN).

The CFG platform helps you upgrade your practice management skills and offers technological support in important areas of your financial advisory such as — analysing investors’ needs, risk profile, creating an asset allocation, building a new portfolio, access to in-depth mutual fund research reports powered by PersonalFN, a mutual fund screener, mutual fund performance trackers, daily market snapshot, comprehensive online portfolio reviewer, a host of other online tools & calculators, downloadable investor education guides, infographics, gifs, a mutual news and blog section to keep you abreast, and much more!

Offering cost-effective financial advice

Now that social distancing norms are likely to stay longer, you should take this opportunity to conduct online meetings with your clients.

You may also want to grow your digital presence by creating social media pages of your financial advisory and interacting with potential investors more often. There could be a lot of cost savings which you can pass-on to your clients/investors.

Enrolling to the CFG platform also gives you access to a loyalty program, under Jimmy ’s Vision Club—a Special Partner to CEO connect platform, wherein you can write to Jimmy Patel, MD & CEO Quantum Asset Management Company, asking queries on the mutual fund industry’s trends, asset allocation, SEBI rules, policies, nomenclature pertaining to mutual funds, their taxation, GST, quantum products and investment philosophy and so on.

You must have also observed that investors believe it’s easy for them to trust the brand promise than depending on a few people. This poses a big challenge for individual advisors as big brands can invest in advance technologies. To be able to compete with them, you might want to take advantage of the CFG platform.

It would be worth devoting some time to fully explore the CFG platform, as it can help you to effectively manage and grow your financial advisory practice/ mutual fund distribution business amidst the COVID-19 crisis. To unlock access to exclusive CFG benefits, register yourself today!

by PersonalFN Content & Research Team

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