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Trust level in financial services highest in UAE

The study identifies increased use of technology as a major trust factor, simplifying investing by improving access to markets and information

The UAE ranks top among the world’s leading markets with the highest trust in the financial services sector, CFA Institute, the global association of investment professionals, revealed on Monday.

Across the globe, trust in financial services has reached an all-time high, with India as the leading market with the highest trust level of 87 per cent, the UAE in second place with 78 per cent, and China in third place with 76 per cent.

“As one of the countries with the highest trust in financial services on a global level, the UAE’s path to a resilient and diversified economy has been marked with efforts to uphold the stability and integrity of the financial system,” says William Tohme, senior regional head, Middle East and North Africa at ‎CFA Institute.

An “Investor Trust Study” conducted by CFA Institute reveals that the proportion of institutional investors with high or very high trust in financial services has risen to 86 per cent (65 per cent in the prior survey). Among retail investors, trust levels are up to 60 per cent (previously 46 per cent).

CFA Institute said the surge in trust currently being witnessed is a positive indicator. “Our latest report, Enhancing Investors’ Trust demonstrates how different factors have helped maintain and build investors’ trust, with technology, value alignment, and personal connections emerging as key determinants in a new, more resilient dynamic.”

Millennial retail investors—and particularly those aged 25 to 34—are the most trusting of financial services (72 per cent of this cohort have high or very high trust).

For the first time, most retail investors globally (56 per cent) 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 and resonates most loudly in India (90 per cent) and the UAE (84 per cent),” said the institute.

Two-thirds of institutional investors say they have now invested in cryptocurrencies. Globally, 32 per cent of retail investors invest in cryptocurrencies, India leading with 67 per cent, 66 per cent in the UAE and 58 per cent in Brazil. Overall, fewer than half of retail investors trust cryptocurrencies to hold their value (42 per cent), compared to 84 per cent of institutional investors, consistent with the different usage levels of crypto by these two groups.

Advised investors are also more interested in personalized products (82 per cent). Direct indexing (cited by 56 per cent), personalized impact funds (53 per cent) and artificial intelligence-driven investments (44 per cent), are of the most interest to retail investors with advisers.

According to the study, which measures trust levels and explores the factors that drive trust in financial services among retail and institutional investors in 15 markets globally, the millennial investor segment is championing technology and customization. This segment exhibits relatively high trust in ventures such as robo-advice, digital apps, investment alerts, and digital nudges for seamless strategy execution. “However, the face-to-face advisory remains a preference among three-quarters of investors, underscoring the importance of the human element – a notion which has remained consistent since the year 2020.”

The study has identified five factors driving higher trust in financial services. These include strong market performance, fee compression, tech-enabled transparency, greater access to markets, and new personalized products.

It also 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 or asset manager, respectively.

The study finds that personalisation 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.

Most institutional investors and most retail investors say technology increases their trust in their asset manager or adviser – due to more transparency, simplified access to markets and products, and personalization.

Globally, 84 per cent of institutional investors would invest in a fund that primarily uses artificial intelligence to select investment holdings, with a similar proportion (78 per cent) believing that use of AI in investment decision-making will lead to better investor outcomes. A lesser proportion of retail investors (39 per cent) would consider AI-driven funds.

— issacjohn@khaleejtimes.com