Investors Dissatisfied With Fund Industry, According To iShares Survey

by Glen Shapiro, LawAndTax-News.com, New York

24 April 2008

iShares Funds, a division of Barclays Global Investors, on Wednesday released the results of its first Investor Survey.

The majority of investors surveyed believe that the fund industry is not meeting their expectations or putting their needs first, resulting in dissatisfaction and a lack of trust, iShares explained.

Investors also believe that the media is failing to provide credible reporting, citing too much hype and not enough focus on important fee- and tax-related issues. In contrast, 87% of investors have a high degree of trust in their advisor, comparable to their level of trust in their family physician.

In addition, when asked about their confidence level with regard to the safety of their investments in a volatile market, only 45% of investors surveyed expressed confidence that their investments would be safe. Just over half of the survey respondents (51%) expect their returns to be worse in 2008 than in 2007.

"The survey shows that investors believe that the fund industry is falling short in meeting their needs, at a time of great economic uncertainty and market volatility," observed Lee Kranefuss, CEO of iShares at BGI.

The survey, "Measuring Affluent and High Net Worth Investor Expectations of the Investment and Financial Community", was conducted by Cogent Research, an independent market research firm, to measure the attitudes and expectations of investors toward a wide range of issues including level of trust and satisfaction with the fund industry, financial advisors and the media, as well as their personal confidence, understanding and engagement in their investments.

The survey was commissioned by iShares Funds, the largest provider of exchange traded funds and a division of BGI, one of the world's largest asset managers.

According to the survey, approximately 71% of respondents either lack trust or are uncertain as to whether to trust the fund industry, and only 34% believe that the fund industry takes responsibility for investors' financial well-being.

A majority of investors (81%) believe that the industry should put the needs of investors first. Fund industry dissatisfaction among the individuals surveyed is driven by issues such as perceived lack of value and transparency for the fund fees paid, and the belief that risks relative to investment returns and potential tax implications are not clearly articulated.

Nearly three-quarters (72%) of investors consider their advisors to be champions of their investment interests. Additionally, only 9% of advised investors are at all likely to change their advisor in the next year.

"This survey should be a clarion call to all of us in the fund industry. While there is a strong trust and bond between investors and their financial advisors, this good news is tempered by a noteworthy mistrust of the fund industry as it relates to a lack of transparency and not providing a clear understanding of investment risks and taxes." Mr Kranefuss continued, going on to conclude:

"The investment industry serves the goals and aspirations of millions of investors. At BGI, we try every day to be investor focused and our reputation is built on our clients' trust."

"The survey clearly indicates the need for all of us in the fund industry to be better, and it's the fiduciary responsibility of all of us to address the needs of investors and their financial advisors to help them make more informed investment decisions."

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