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Key Statistics from FINRA’s U.S. Investor Survey

February 8, 2017 Blog

Each year, the Financial Industry Regulatory Authority (FINRA) surveys U.S. investors with non-retirement portfolios and publishes the results of the survey in a report called, “Investors in the United States.” It recently released the results of its survey for 2016.

Here are some of the highlights:

More than 50 Percent of Investors Rely on a Financial Professional

According to FINRA’s survey results, slightly more than half of all investors with non-retirement portfolios rely on the advice of a financial professional. Survey respondents who used financial professionals reported having three primary reasons for doing so:

  • To improve investment performance (81 percent)
  • To avoid investment losses (78 percent)
  • To learn more about their investments (63 percent)

“Investor Literacy” Is Below 50 Percent

FINRA’s survey included a 10-question “investor literacy quiz,” which was designed to test respondents’ knowledge about basic investment principles and terminology. For example, one of the questions was, “Which is the best definition of ‘selling short?’” which only 21 percent of respondents answered correctly.

Overall, male investors answered just under five out of 10 questions correctly on average, while female investors averaged a correct response rate of just under 40 percent. Women were also more likely to state that they did not know the answer rather than answering incorrectly. FINRA Foundation President Gerri Walsh suggests this may reflect “differences in investor confidence by gender.”

Only 10 percent of survey respondents were able to answer eight or more questions correctly.

Automated Financial Advice is Popular Among Younger Investors

In recent years we have seen the rise of investment software – and even smartphone apps – that offer automated financial advice. It appears that these “robo-advisors” are catching on, particularly among younger investors. According to the survey results, 38 percent of investors between the ages of 18 and 34 have used a robo-advisor, compared to only four percent of investors over the age of 54.

Those Who Use Advisors Trust Them More

This may seem obvious, but it is interesting to see the data regarding investor confidence in financial advisor independence. According to the survey results, investors who use advisors have a far more favorable opinion of advisors’ independence and fiduciary capabilities:

  • 43 percent of investors who use advisors believe that incentives for selling certain investments would affect advisors’ recommendations, compared to 62 percent of those who invest independently.
  • 40 percent of investors who use advisors believe that compensation from third parties for selling their investment products would affect advisors’ recommendations, compared to 64 percent of independent investors.
  • 34 percent of investors who use advisors believe that commissions based on trading activity would affect advisors’ recommendations, compared to 55 percent of independent investors.

Advisor-Investor Communication is Limited

Despite entrusting their investment portfolios to their advisors, most investors speak with their advisors less than three times a year. A quarter of the survey respondents had not spoken with their advisors more than once in the past year, with 12 percent having had no contact over the previous 12 months.

Discuss Your Advisor’s Performance with a Stock Fraud Lawyer at Zamansky LLC

Zamansky LLC is an investment fraud law firm that helps individual investors recoup their losses resulting from unsuitable investment advice, account churning and other improper advisor practices. If you would like to discuss your investment advisor’s performance in confidence, call (212) 742-1414 or contact us online for a free consultation today.

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