Trust is important for any successful relationship.
The relationship asset managers have with their clients should be no different. Trust can increase consumers’ confidence, engagement, loyalty and even willingness to take financial risk. When we think of measuring the success of asset managers, we often think AUM or ROA. Arguably, trust is just as important, although less easy to quantify.
Despite being less easy to quantify, Research in Finance have measured trust in the asset management industry repeatedly, as part of the Retail Consumer Interests study (RCI). First in 2019, we looked at trust post-Woodford collapse, then in 2020 during the COVID-19 pandemic. In this latest wave of RCI, we measured consumers level of trust in the asset management industry amidst record inflation and the Russia-Ukraine war.
What does the latest wave show?
Data from this latest wave of RCI, shows only 12% of private investors say inflation has decreased their trust in the asset management industry.
Figure 1. Chart to show consumer trust as a result of inflation
Source: Research in Finance’s Retail Customer Interests Study Quarterly, 2022, Q2 Sample n = 304. Question asked, “Has your trust in the asset management industry changed as a result of recent inflation?”
Although, the data does suggest investors over 55 have less trust in the asset management industry as a result of inflation, when compared to their younger counterparts. Perhaps because they are more likely to take retirement income from their investments and generally become more cautious with age.
Has investors’ trust in the asset management industry changed in the last year due to geopolitics?
Surprisingly, only 15% of private investors express their levels of trust had changed due to geopolitical events. Of the 15%, who said their trust had changed, 37% said it had weakened – mostly due to the Russia-Ukraine war.
Figure 2. Pie chart to show whether trust in asset management has changed in the last year due to geo-political events
Source: Research in Finance’s Retail Customer Interests Study Quarterly, 2022. Sample n = 304. Question asked, “Has your trust in the asset management industry changed in the last year, as a result of Geopolitical events?”
So, what does erode trust?
Despite the magnitude of inflation and geopolitical instability, it appears private investors largely understand these events as out of the control of asset management companies and therefore, unrelated to levels of trust.
Conversely, our 2019 research highlights that the type of events most likely to have an impact, are those directly related to the capabilities of asset managers. This includes socially unjust behaviour, customer deceit, lack of transparency around charges, profiteering and failing to honour customer promises and/or loyalty.
Trust is important in businesses that rely on transactions, especially in the asset management industry where there is often an inequality of market knowledge accessible to private investors, and where there is less predictability in outcome compared to other sectors within the financial industry. When we think of successful asset managers, we should also think trust.
To find out who the most trustworthy asset managers are and what builds trust, or for more general enquiries about RCI, please contact Richard Ley or Mick Hrabe. Options exist to purchase this wave of (RCI), as well as the opportunity to become a full syndicate member for the next wave.