Trust level among investors in the UAE's financial services sector is higher than their counterparts globally, a study by the CFA Institute revealed on Tuesday.
When selecting an adviser, global investors place more emphasis on personal trustworthiness and ethical conduct, while investors in the UAE are more concerned with returns, according to the study on trust in the country's financial services sector.
While 46 per cent of investors in the UAE "completely trust or trust" the financial services sector, slightly higher than investors globally, they tend to be younger than those in many other countries. "This may partially explain higher trust levels, as younger investors globally are also more trusting of financial services," said the study.
The study finds that investors in the UAE are confident, with 47 per cent claiming they are very confident in their investment decision-making, compared with just 33 per cent of investors globally. However, many still prefer to invest with the help of a financial adviser.
"Although the primary investment goals for global investors are retirement related, investors in the UAE have different reasons for investing. The number one investment goal for investors in the UAE is saving to start a business, followed by saving for a large purchase," said the report "The Next Generation of Trust: A Global Survey on the State of Investor Trust," which polled 3,000 retail investors.
Analysts at CFA Institute said the entrepreneurial nature of investors in the UAE means they value advice from many sources. Similar to global investors, 54 per cent of investors surveyed in the UAE have a financial adviser. Only 32 per cent of investors in the UAE, however, assume their advisers are trustworthy. That is compared to 29 per cent that said trust must be proven at least once to give the benefit of the doubt and the 37 per cent that expect advisers to earn and maintain trust continually.
Paul Smith, CFA, president and CEO of CFA Institute, said: "There is work still to be done. Higher trust comes with higher expectations, and we are not there yet until we can consistently prove our value to clients by providing solutions, not simply products. We need universal disclosure of fees and performance to drive home this message."
"These findings provide a roadmap for how our industry can increase its credibility and address investor concerns. Trust hinges on professionalism. Advisers need to demonstrate a strong commitment to ethics, expertise and transparency to win their clients, and create real value for the fees they charge. If one third of investors don't think their adviser puts their interests first, this is a challenge to our industry to do all we can to earn that trust," said Rebecca Fender, CFA, head of the Future of Finance initiative at CFA Institute.
"This might have some investors in the UAE turning to other sources for advice. When asked about their primary source of investment information, most chose 'friends and family' over 'my primary financial adviser.' This was a much greater reliance on friends and family than in any other market surveyed," they said.
Analysts said trust continues to be an important factor throughout the client life cycle.
"In the five years we have been conducting this study, trust has consistently been the greatest determinant in selecting a financial adviser by an almost 2:1 margin over investment performance. This is not the case, however, in the UAE."
Investors in the UAE are most likely to switch firms due to a data/confidentiality breach, while underperformance is most important globally, said the report. "When selecting an adviser, global investors place more emphasis on personal trustworthiness and ethical conduct, while investors in the UAE are more concerned with returns."
According to the survey, while about 50 per cent of investors in the UAE expect a financial crisis compared to 38 per cent globally, 70 per cent of investors believe that their investment firm is "well or very well prepared" to handle the next crisis, compared with just 55 per cent of investors globally.