06/17/2016 05:29 EDT | Updated 06/17/2016 05:59 EDT

What Do You Look For In An Investment Firm?

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Portrait of worried young couple reading financial documents in kitchen

Each of us has our own unique preferences and matters of importance in working with financial professionals. Have you taken the time to consider what is most important to you?

The CFA Institute, a global association of investment professionals, recently released their survey "From Trust to Loyalty: A Global Survey of What Investors Want." The results of this survey reveal on a global basis what both retail and institutional investors are looking for in their financial professionals. We will focus here within on the retail perspective to provide you with a comparison of your own thoughts towards the financial services industry.

While the overall trust within the financial services industry has generally increased on a global basis, we have seen Canadian retail investor trust fall from 76 per cent in 2013 to 64 per cent in 2015. Half of Canadian retail investors indicated they would recommend their existing firm to others, yet the conviction of this recommendation is lacking.

With 59 per cent of those who have a personal financial adviser looking to that professional as their most trusted source of professional investment advice, we will examine the four most important factors of Canadian retail investors in working with their financial services firm.

1. Ethical standards ranked of highest importance in Canada, the highest rating by any country surveyed

Investors want to know that their financial adviser is doing what is right for them at all times. They are looking for forthright communication, upfront dialogue on fees and any potential conflicts of interest. Finally, a clean record of regulatory and compliance violations is also of great importance.

2. Fees continue to be of critical importance in working with a financial adviser

Of greatest importance with regards to fees, is that the financial advisers are very clearly disclosing all fees and other costs in advance of the fees being charged. In fact, 46 per cent of retail investors claimed they would consider leaving their investment firm due to an increase in fees. Investors want to feel that the fees they are being charged as reflecting the value they are receiving in the relationship.

3. Client Service ranked of third highest important in evaluating investment firms in Canada

Investors cite a lack of communication and responsiveness as one of the top drivers to leave an existing firm. Clients are looking for a full understanding of why their portfolio is positioned in the way it is and expect to be provided with performance reports that are easy to understand. Investors also want to be assured that reliable security measures are in place to protect their data.

4. While Performance is noted overall as the fourth most important factor, underperformance is cited as the #1 reason a client will consider leaving a firm

This goes to show that while other factors such as service, fees and ethics are of great importance to investors, performance, or rather underperformance remains of key consideration. Clients expect to generate returns similar to or better than both competitive firms and the target benchmarks. Given the volatility experienced in recent years, protecting client portfolios from losses is also of significant importance to these investors.

Canadian retail investors feel that financial services firms are falling short in the areas of ethics, fees and performance. With more alternatives that ever before, investors expect open communication and transparency in working with their advisers.

In the end, this continues to be a business of people and trust. In Canada, 80 per cent of investors reported a greater importance of having people they can count on, versus just 20 per cent emphasizing a brand they can trust. And 81 per cent expect that in three years' time, having a person to assist with financial and investment strategies will remain of greatest importance over access to the latest technology platform.

Investors want to know that financial professionals are committed to their overall well-being. As industry charges and investor preferences continue to evolve, the financial advisory professions will need to change with them to avoid being left behind.

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