When it comes to investing, do friends and family know best?

It seems good news for intermediaries to see recent research from Schroders finding two thirds of investing Europeans plan to ask for independent financial advice this year.

After a year of extremely difficult markets, European investors seem to be ‘outsourcing’ their investing future to others.

The key question for fund managers, and indeed also for allocators, is ‘to whom exactly’?

The answer to this question will no doubt guide retail fund managers’ sales efforts, and at a time when money is tight campaigns must succeed, whether targeting family offices, private banks, wealth managers or independent financial advisers.

Schroders’ research was pan-European, polling 1341 affluent investors in 12 countries. It found tax efficient products, pensions, appropriate savings levels and asset allocation were the most often mentioned as topics for discussion.

Peter Beckett, Schroders’ head of international marketing, said: “For 65% of investors, financial advice is the key to achieving growth and by making a plan, investors can start to regain control and identify how to realign their investment strategy to meet their long-term goals.”

But in Europe’s second largest fund market, Germany, separate research from Franklin Templeton suggested friends and family may play an even more significant role than professional advisers, at least in guiding equity investments and some retirement planning – which could involve funds.

About 40% of those questioned said advice from a financial adviser was ‘important’ or ‘very important’ when buying or selling shares – so, good news for advisers there. But in total, 57% said they would follow the advice of family or friends.

And when it comes to pensions, setting the right investment risk or having an influence on financial decisions, 78% of German respondents said they themselves were the most important decision makers, followed by husbands/wives (mentioned by 53%) and family (51%).

For pension planning, financial advisers were mentioned on only 33% of occasions.

The State, friends and employers played a less important role, said Franklin Templeton.

Peter Stowasser, head of distribution for Franklin Templeton Deutschland, said: “The questionnaire points to investors willingly relying on the know-how of financial advisers when it comes to single equity decisions, but show a pronounced independence when it comes to holistic financial planning.”

The key question then, is how should a fund manager convince an investor directly, or via their friends or family, where or how to invest?

Social media may be part of the solution. Having funds on billboards will be another part. But arguably the best advertisement for a fund in this context will be word-of-mouth, or recommendation – and the kind of recommendation you get from a family member will probably be a very honest appraisal of a fund’s performance.


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