Shocking findings from a new report reveal many investors and plan participants—over 40 percent—either aren’t provided with, or don’t know if they are provided with, core information about investment performance.
Moreover, research firm Phoenix Marketing International finds more than one in three investors and/or 401k participants (35 percent) aren’t entirely confident the information they receive is accurate and reliable.s
These “significant gaps” are occurring in reporting effectiveness, despite an explosion of technology enhancements that give investors robust information and online access to consolidated and customizable views of portfolios holdings.
“Real transparency isn’t simply throwing more data at investors,” David Thompson, managing director, Financial Services Affluent Practice, at Phoenix Marketing International, said in a statement. “It’s about providing investors with relevant, reliable and straightforward information about investment performance and progress toward goals, with an understanding of how they prioritize that information.”
At its core, Thompson added, the relationship between investors and investment advisors is based on trust.
“Transparent reporting may be the best tool advisors have to earn that trust, differentiate themselves and demonstrate their value.”
A key finding of the study is that some investors perceive an inherent conflict of interest with investment advisors as the source of performance reports. This was the case across the discretionary advice spectrum, from automated robo advisory platforms to full-service wealth management, and regardless of a fiduciary standard or not.
A nagging question on investors’ minds is whether disclosures and the presentation of performance measures change depending on results and if third-party validation would show a different outcome.
“Through the eyes of some investors, a performance report crafted by an advisor or firm overseeing the investments is like a school report card written by the student,” Thompson noted. “Confidence not only in the data and how it is presented but also who it comes from affects investor behavior and is a perception financial firms will want to address.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
