Trust In Singapore’s Financial Services Industry – Are We At Rock Bottom Yet? Where Next?

Trust in Singapore’s financial services industry dropped a significant 11 percentage points to 36% in 2020. The decline in trust levels was flagged out in CFA Institute’s fourth global trust survey which surveyed 15 markets and 3,525 retail investors globally.

This research report aims to address and arrest the decline, which can have long lasting effect on investors’ wealth aspirations, such as saving for children’s education, as well as retirement adequacy. The knock-on effects of slower growth or lesser capital flow into the financial services sector can adversely impact future job opportunities and Singapore’s hub status in the region.

• ‘Blue chip’ risk assets that lose significant value or go into default do indeed shake trust levels and confidence in the financial services sector. Mass media, with continued coverage of the loss and investors who were badly affected, has amplifying effects and tends to further dampen trust levels.

• Investors felt that only a quarter of investment firms were ‘very well prepared’ or ‘well prepared’ to manage their portfolio during a financial crisis. Investors reaching retirement age may have limited opportunities to recoup financial losses.

• Much of how trust levels will change, however, is also dependent on the actions of financial representatives and institutions in volatile and uncertain environments. If financial professionals communicate and ‘hand hold’ investors (plausibly for emotional support), trust levels may be maintained or even go up especially with the older investors who are accustomed to their relationships with their remisiers / brokers.

• Investors ranked ‘trusted to act in their best interest’ as more important than ‘ability to achieve high returns’ when it came to selecting a financial adviser in Singapore.

• Despite numerous complaints, Merdeka Generation investors, in a rare admission, also heaped praises on the continued improvement in the quality of advisers over the decades. They claim advisers today are more knowledgeable, and are able to explain products thoroughly.

• There is a need for ethical training amongst frontline representatives, as well as product originators and manufacturers. Only by addressing the entire value chain will there be improvement in trust levels. However, there are gaps with current ethics course offerings in Singapore, including the ethics offerings of the CFA® Program.

• We also note that most advisers know that certain practices borders on or are downright unethical. They know what should be done, but they are not sufficiently equipped to take action without the risk of losing their job or being penalised.

• Advisers must be equipped with muscle memory on how best to navigate the ethical dilemma with a lower probability of adverse repercussions on their careers and livelihoods. Otherwise, ethical discourse is just meant for what it is — an academic exercise with no real value in practice.