Indian investors concerned about data, confidentiality breach by investment adviser: Survey

Retail investors in the country have the strongest level of trust in the financial services industry, almost 30 percent higher than the global average, but are also concerned about data or confidentiality breach, with nearly 41 per cent of them stating that they would consider changing their current investment firms, says a global survey.

According to the survey done by CFA Institute, a global association of investment professionals, 71 per cent of Indian investors trust the financial services industry, compared to 44 per cent globally and 49 per cent in the Asia Pacific region.

Nearly 92 per cent of domestic investors still trust the system and capital markets and believe they have a fair opportunity to profit, the 'The Next Generation of Trust: A Global Survey on the State of Investor Trust' stated.

The study, which was done by CFA Institute in collaboration with Greenwich Associates, gathered responses from 3,127 retail investors and 829 institutional investors from India, China, France, Germany, Singapore, the United Arab Emirates, United Kingdom, United States and other countries.

Indian, as well as global investors, the survey revealed, believed that the most important attribute while taking a decision to hire a financial adviser was being able to trust that the adviser would act in the interest of the investor.

Less than half, about 45 per cent, of Indian retail investors said their financial adviser always put investors’ needs first.

"The survey shows growing concern among Indian investors who said they have already left or would consider leaving investment firms as a result of a data or confidentiality breach (41 per cent), underperformance (39 per cent), and lack of communication (37 per cent)," it stated.

The survey also highlighted a significant gap between what more than 3,100 retail investors and 800 institutional investors in 12 markets expected from their financial advisers and how satisfied they were with their existing relationships.

"Trust plays a vital role in the world of finance and has consistently been the greatest determinant in selecting a financial adviser. If only one-third of global investors and less than half of Indian investors believe their adviser always puts investors’ interests first, it is a challenge for our industry to earn back their trust," CFA Institute India head, Vidhu Shekhar, said.

Investors surveyed in India said that their trust in advisers was driven by those with reliable security measures to protect data (83 per cent importance), and those who provide easy-to-understand investment reports (82 per cent).

Around 81 per cent of domestic investors said they would employ investment professionals with credentials from respected industry organisations.

Close to 79 per cent of Indian investors will prefer engaging with investment professionals who can help generate returns better, fully disclose fees and other costs (78 per cent), charge fees that reflect the value received from the relationship (77 per cent), and disclose and manage any conflicts of interest (72 per cent).

The findings also revealed that 56 per cent of Indian investors believe there will be another financial crisis in the next three years, the highest number globally, with the likely next source being national/global politics (46 per cent), governments defaulting on debt (34 per cent), cryptocurrency bubble (31 per cent), and cyber attack (28 per cent).

"However, 83 per cent of Indian investors believe their advisers are well or very well prepared to manage their portfolio through a financial crisis, as compared to 55 per cent of investors globally," it showed.

"With 87 per cent of Indian respondents under the age of 45 years, all advisers need to do is to demonstrate a strong commitment to ethics, expertise, and transparency," Shekhar said.