CFA Institute trust study finds levels of Trust in Financial Services Reach All Time High

CFA Institute, the global association of investment professionals, has published Enhancing Investors’ Trust – the 2022 CFA Institute Investor Trust Study, the fifth in its biennial series, which measures trust levels and explores the factors that drive trust in financial services among retail and institutional investors in 15 markets globally. The study reveals that trust in financial services has reached an all-time high.

The study reveals five factors driving higher trust in financial services: strong market performance, fee compression, tech-enabled transparency, greater access to markets, and new personalized products. Investor trust in financial services has increased in 2022 across all generations, and millennials continue to have the highest trust levels. Although Gen X has had the largest increase in trust since 2020, millennials are the generation that is driving trust levels upward.

The study identifies increased use of technology as a major trust factor, simplifying investing by improving access to markets and information. Half of retail investors and more than four-fifths of institutional investors say that increased use of technology has increased trust in their adviser. The study also finds that personalization is additive to trust, and advisers who understand their clients personally, or provide investment products that align with clients’ personal values and beliefs, can deliver the most value.

Nick Pollard, Managing Director, Asia Pacific at CFA Institute, said: “Amid market volatility, and an uncertain and complex environment, there have been significant changes in trust levels in financial services around the world. Technology, the alignment of values, and personal connections, are all coming through in our investor trust study as key determinants in the trust dynamic. Trust in financial services is highest in major Asia Pacific markets, including India at 83% and mainland China at 76%. Hong Kong SAR saw a modest increase in trust level to 54%, which is slightly lower than the global average of 60%. While trust is relatively low in Hong Kong SAR among retail investors of cryptocurrencies, at 21%, and robo-advisers, at 29%, some 60% of survey respondents said having access to the latest technology platforms and tools to execute their investment strategy will be more important in three years’ time.”

The growth of ESG investing has increased trust in the financial services industry, according to 78% of institutional investors. The findings show that interest in this area is extremely high in Hong Kong SAR, with 100% of institutional investors and 88% of retail investors either interested in, or already using, ESG strategies, up from 80% and 79% respectively in 2020.

The primary motivation for retail investors in Hong Kong SAR to consider investing in ESG strategies is that they expect ESG investing to result in higher risk-adjusted returns (49%), the highest percentage among all the markets, the secondary motivation is to express personal values or to invest in companies that have a positive environmental or societal impact (33%). Globally, institutional investors are more focused on using ESG investing to achieve higher risk-adjusted returns, but increasingly investors expect both outcomes. Climate change (47%) and clean energy (42%) are the top ESG priorities for retail investors, while institutions are focusing on data protection and privacy (27%), and sustainable supply chain management (25%).

Key Findings

• Globally, the proportion of institutional investors with high or very high trust in financial services has risen to 86% (65% in the prior survey). Among retail investors, global trust levels are up to 60% (previously 46%), while regionally, APAC (Asia Pacific), EMEA (Europe, the Middle East and Africa) and AMER (Americas) saw their levels of trust at 62%, 52% and 64% respectively. Retail investors are now more trusting in all markets surveyed except India, where trust has fallen from 87% to 83%, although it remains the market with the highest trust level. Hong Kong SAR saw a modest increase in trust level by 2 percentage points to 54%, slightly lower than the global average. Germany (37%) is now the lowest trust market (previously Australia). Millennial retail investors—and particularly those aged 25 to 34—are the most trusting of financial services (72% of this cohort have high or very high trust).
• Advisers add trust: Retail investors with advisers (58%) are more willing to try new investment products compared to investors without an adviser (37%). Advised investors are also more interested in personalized products (82%) and are willing to pay additional fees for customization (75%). Direct indexing (cited by 56%), personalized impact funds (53%) and artificial intelligencedriven investments (44%) are of the most interest to retail investors with advisers.
• Most institutional investors (87%, up from 66%) and most retail investors (50%, up from 48%) say technology increases their trust in their asset manager or adviser – due to more transparency, simplified access to markets and products, and personalization.
• In Hong Kong SAR, 71% of retail investors have a retail trading account, the fourth highest among all the markets, following mainland China (84%), Singapore (83%) and India (77%). In terms of generational differences, globally, the under-35s are nearly twice as likely as the over 65s to have a retail trading account (68% versus 37%, respectively), and are nearly three times more likely to trust digital nudges (92% versus 33% respectively), e.g. communication via push notifications. Overall, 71% of retail investors say that retail trading apps have increased their understanding of investing, and most say these apps have increased their frequency of trading (57%).
• APAC (43%) sees the highest trust from retail investors in robo-advisers among all regions, followed by AMER (28%) and lastly EMEA (27%).
• For the first time, most retail investors (56%) envisage that in the next three years, access to technology platforms and tools through which they can execute their investment strategies will be more important than access to a human being for assistance. This reflects a steady shift in sentiment across 12 of 15 markets surveyed, including Hong Kong SAR which saw 60% of retail investors anticipating the change, slightly higher than the global average
• Advice is still the domain of humans. Three-quarters (74%) of retail investors are more likely to trust human advice versus robo-led advice—a level that has remained stable since 2020 (73%). China is currently the only market where fewer than half of retail investors distinctly prefer a human adviser.
• Globally, 84% of institutional investors would invest in a fund that primarily uses artificial intelligence to select investment holdings, with a similar proportion (78%) believing that use of AI in investment-decision-making will lead to better investor outcomes. A lesser proportion of retail investors (39%) would consider AI-driven funds. Particularly, only 25% of Hong Kong SAR retail investors intend to invest in those funds.
• Two-thirds of institutional investors say they are now invested in cryptocurrencies, with government-sponsored pension plans the most likely holders (94% of those surveyed). Globally, 32% of retail investors invest in cryptocurrencies, compared with 21% in Hong Kong SAR. Overall, fewer than half of retail investors trust cryptocurrencies to hold their value (42%), compared to 84% of institutional investors, consistent with the different usage levels of crypto by these two groups.
• Retail investors across all markets are either interested in or already using ESG investing strategies (77%), while Hong Kong investors’ interest is higher than the global average, at 88%. ESG areas of interest vary among retail and institutional investors: climate change, clean energy, air and water pollution are the top concerns for retail investors, while data protection, sustainable supply chain management, and climate change are the top concerns for institutions. Among institutional investors, best-in-class screening (cited by 57%) has overtaken engagement and active ownership as the most popular approach to ESG investing, and institutional investors are showing high levels of trust in ESG messaging and net-zero pledges (87% trust such messaging). In contrast, less than half (46%) of retail investors trust these pledges, illustrating some concerns over potential greenwashing. The concerns from Hong Kong SAR retail investors are even higher, with only 28% trusting the pledges.
• Globally, 40% of retail investors say it is important to have an adviser who shares their values. This sentiment is highest in mainland China, where 74% believe shared values are important.
• Retail investors are increasingly using brands as a proxy for trust, with 55% citing the importance of brand in selecting firms to work with. In-person connection still matters, globally, 54% of retail respondents favor in-person meetings for establishing an investor-client relationship at the outset. In Hong Kong SAR, more than half of retail investors (51%) say that in-person interaction is necessary to trust an adviser.
• Institutional investors revealed a change in the factors that could lead to lost trust. From a previous emphasis on financial performance, respondents reveal that a failure to adopt a standard voluntary code of conduct (cited by 23%), and a publicly stated corporate view on a social or political issue that does not align with those of the institutional client (21%), are now the top two factors for lost trust. However, in Hong Kong SAR, the top three factors are the attractiveness of competitor offerings (31%), lack of communication (26%) and high fees (26%).

To view the full survey and results, visit: CFA Institute: Earning Investors' Trust.