Generally speaking, consumers (investors and pension members) do not have the financial literacy to confidently wade through the financial jargon put in front of them. This is why many are happy to default to experts whenever they can. There is certainly an acceptance that some decisions should not be made by the consumer themselves. That said, while consumers may look to financial experts for risk and performance considerations, they still want their voices to be heard and their individual circumstances to be taken into account. As a result, trust and the relationship between the consumer and industry expert is paramount.
This is not just relevant for financial advisors. This is also very relevant for fund managers - who may feel more intermediated but are critical characters in the investment story. And with talk of fund managers, that brings us to stewardship. Stewardship is an area where trust (and transparency) could be greatly improved because we know consumers want to understand how fund managers place shareholder votes on their behalf:
“Doesn’t matter how tiny of an investor you are because you can have can still have your voice heard. You can then pass it on to someone with higher-power who is capable of instigating change.” - Tumelo Platform User, March 2020
Some fund managers - like WHEB Group - are already successfully using transparency to differentiate themselves. Although often "transparent" information is still hard to find or interact with on fund management websites; and of course many don't publish this information at all. This means consumers don't know what shareholder voting is, how votes are being placed on their behalf, or whether their fund managers align with their own values set.
As an industry, we need to address this information asymmetry and to strike a balance between expecting consumers to "trust the experts" and giving them transparency and control. Fund managers and investment platforms need to show consumers that they can handle long-term decisions responsibly and this, in turn, will increase consumer satisfaction levels in the short-term. It's no longer just about performance and risk.
Responsible, transparent, and even participatory stewardship can provide an excellent way to build trust and connection with consumers. Giving them some influence over shareholder voting provides the instant gratification craved by so many tech-savvy millennials while complimenting the long-term goals of investing. Trust cannot be solved by a quick fix but understanding consumer behaviour and communicating what experts are doing - across the board - more effectively will go a long way, that now includes stewardship.
"I feel a bit powerless in big organisations. But I do trust that a Fund Manager takes my vote on board." Tumelo Platform User, April 2020