Conversely, 18% have stated that their advisors rarely or never put their clients’ interests first, the highest proportion among the 12 markets, according to a report published this week.
“There’s a sense of neglect, and that the most important focus of advisors is on the products and less on the individuals,” Nick Pollard, managing director for Asia-Pacific at the CFA Institute, told FSA.
Singapore investors were just after Hong Kong, with only 10% of respondents believing in their advisors.
Data: CFA Institute
However, another result suggests that trust is low because it is not investors’ primary concern.
While respondents in most markets ranked trust in their advisors above their ability to deliver high returns as the top consideration when choosing an advisor, Hong Kong investors ranked high returns first. The only other market with this order of priorities was United Arab Emirates.
Whether as a result of such focus on returns, or the inability to develop a relationship based on trust, Hong Kong customers of financial services are notorious for shopping around and switching advisors, according to Pollard. The survey showed that they are much more likely (63% of respondents) than the global average (47%) to leave their advisor based on performance.
This “promiscuity” is quite common among advisors as well, who tend to switch firms every two-three years, according to Pollard, much more frequently than in developed markets in the West. This phenomenon erodes the industry’s ability to establish long track records and the importance of brands, which are primary considerations for many investors when choosing advisors.
Hong Kong investors trust in their financial advisors has declined by 6 percentage points since the previous such survey, two years ago.
Crisis concerns
“Hong Kong is markedly more concerned about the future than other markets, expecting another global financial crisis,” Pollard said. 47% of the respondents in the territory said they expected a crisis within the next three years, compared to the global average of 38%.
Most of them think it will be triggered by a housing bubble and a mortgage crisis, which is understandable, according to Pollard. “The vast majority of wealth in Hong Kong is dependent in some way on the real estate market,” he said. Investors in other markets are, on average, most concerned with geopolitics as the most likely potential trigger of a crisis.
Should a crisis materialise, Hong Kong investors are less confident than their peers that their financial firm is well prepared to handle it. Only 25% said they believed their firm was prepared, compared to 55% of investors globally.
Singapore offers an interesting comparison. While the level of trust in financial advisors is low in both markets (7% in Hong Kong, 10% in Singapore, compared to 46% in the US and 45% in India, the two highest scores), Singapore numbers are rising.
Singapore regulators as well as investors have taken to heart the competence of advisors as an important aspect of the relationship, Pollard said. In particular, the requirements for continuing professional development for advisors are “three times more demanding” in Singapore than they are in Hong Kong, he noted.
An essential aspect of trust is the transparency of fees advisors charge for their services. While a “one size fits all” approach to fees is not the right answer, according to Pollard, advisors need to be completely transparent about them from the beginning.
Technology may force progress, as it has in other service industries. Just as customers are now able to rate and compare hotels and doctors online, they may soon be able to do the same with financial advisors.
“You’ll be able to get information about how well someone is performing, but also about how often they call you, how accessible they are, how well they explain things to you,” Pollard said. “We all want to deal with businesses that have the best reputations.”
The third biennial study was conducted by the research firm Greenwich Associates, which surveyed 3,127 individual and 829 institutional investors in 12 markets in November and December 2017.
