There's not a huge amount of confidence from investors in the performance data they're given from advisors and 401(k) plan providers.
That's according to research from financial research firm Phoenix Marketing International, which finds in its report "The State of Investor Trust and Transparency" that 41 percent of investors aren't provided, or don't know if they're provided, with core information about investment performance from their investment advisor, 401(k) plan provider and other financial firms.
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That's not all they aren't sure about. Thirty-five percent aren't completely confident that the information they do receive is accurate and reliable.
The study reveals that there are significant gaps in reporting effectiveness, in spite of a breadth of technology enhancements that are able to provide investors with "robust information and online access to consolidated and customizable views of portfolio holdings," the study says.
"Real transparency isn't simply throwing more data at investors," David Thompson, managing director for the financial services affluent practice at Phoenix says in a statement.
Thompson adds, "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, 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."
One key finding is that some investors perceive an inherent conflict of interest with investment advisors as the source of performance reports.
This is the case with all sources of discretionary advice, whether automated robo-advisory platforms or full-service wealth management, and whether a fiduciary standard exists or not.
Investors wonder whether disclosures and the presentation of performance measures change, depending on results, and whether third-party validation might show a different outcome.
While the validity of investment performance is one reporting attribute investors in the study rank as a high priority, it also evaluates respondents' considerations about the relative importance and extent of other factors important to them.
Those include fee disclosures; readability and simplicity of information; return metrics compared to appropriate target benchmarks; construct of relevant benchmarks, according to risk and time horizon, against investable alternatives; impact of performance on investor goals and objectives; returns compared with other advisors/firms; returns compared with those for investors with similar goals and objectives; and risk and behavior scenarios and expectations.
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