Platforum – 37% of ‘self-directed’ European investors paying for advice
New research from Platforum reveals that while 45% of European investors say they deal with investments entirely by themselves without any expert help, in fact only 29% are fully self‐directed.
More than one third (37%) of investors who say they manage their investments themselves are receiving advice – or at least paying for it – typically from a local bank.
In Italy and Spain in particular, over half of investors who say they are self‐directed bought investments through their local bank and did receive – or at least paid for – financial advice.
“Our research indicates that investors don’t value the advice they are receiving in their local bank,” said Heather Hopkins, head of Platforum. “It also suggests a low quality and intensity of advice, lacking the rigorous (and memorable) fact finds that advised investors typically endure.”
Tracker funds vs active funds
To understand future investment preference and attitudes to active versus tracker funds, Platforum presented investors with a scenario in which they have unexpectedly come into some money, around €20,000, and then asked them questions about how they would invest this amount.
On average across the markets we surveyed, 35% of investors would put most or all of the money in active funds and 10% would put most or all of the money into index tracker funds.
“The results show that investors in countries with higher fund management charges show a preference for tracker funds and investors in countries with lower fund management charges prefer active management,” said Heather Hopkins. “This provides evidence that lower fees for asset management will increase demand for active management.”
Platforum’s analysis reveals that investors from countries with higher costs of asset management tend to have a higher stated preference for index tracker funds.
Italy and Germany have among the highest asset‐weighted average net expense ratio, at 1.42% and 1.25% respectively, and a larger share of investors in each market would put most or all of the money into tracker funds.
By contrast countries with a lower cost of asset management tend to have a lower preference for passive tracker funds, in particular the Netherlands (0.75%) and France (0.83%).
Similarly, investors from countries with lower fund management costs show a preference for active fund management. In the Netherlands where the asset‐weighted average net expense ratio is 0.75%, 29% of investors say they would invest all of the money in active funds under the scenario.