Europe's retail investors have the lowest understanding of investment products than the investing public in the US and Asia, a survey of global fund managers indicates.
No European manager was prepared to say that investors have a relatively high understanding of products, compared to 55% in North America and 50% in Asia and Latin America.
Due to the importance of retail investors as a customer base, this presents a significant challenge for managers’ growth aspirations, says Michael Fergusson, a regulated funds leader at consultancy EY, which carried out the survey.
Despite hopes that social media will help with distribution, EY warns that the distribution model in Europe – which sets the retail customer at the other end of a distribution chain involving advisers and potentially platforms – may be of limited help.
Fergusson says: “Managers are hoping that social media will help to develop investor knowledge as well as brand and product awareness among the retail investor audience. However, in markets like Europe, the shape of the distribution model means that the ultimate investor relationship is further down the value chain: social media may help, but it is not going to solve the entire problem of how engaged and well-informed European retail investors are.”
Sixty-three per cent of managers believe that social media will influence product and distribution strategies in five years, although managers in Europe and Asia are more bullish about this than those in North America.
The survey covers 42 managers representing 30% of regulated funds, including Europe’s Ucits funds, globally.
Fund firms are expecting annual net new money growth of 9% for the next five years, the survey – entitled Global regulated funds survey 2014 – also finds, with North American and European managers expecting 10% annual growth, and Latin America and Asia managers with a more cautious growth outlook at 7%.
Recent net new money growth rates for the whole industry have been 3%-5%.
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