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Trustworthy Advice & Individual Investors–What Do Advisors Have to Say About the Fiduciary Standard?

Posted by Kathleen McBride on August 28, 2013 in In the News

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This week we have a guest post from Kathleen M. McBride, AIFA®, founder of FiduciaryPath,LLC, a company that offers consulting services to assess a firm's conformance to the Global Fiduciary Standard of Excellence.  She was previously a Director at the Institute for Private Investors, Wealth Editor in Chief at AdvisorOne.com and Senior Editor at Investment Advisor. 

>>>>Advisors had a chance to speak out about the fiduciary standard in the 2013 fi360-ThinkAdvisor Fiduciary Survey. What stands out in the findings, just released, reveals a wide gap between executives of traditional broker-dealers and the advisors at those companies who work with clients. The data show that most intermediaries, across the spectrum of business models, registration categories and compensation types, want to build trust and long-term relationships with their clients.

Overall, no matter the respondent’s demographic profile, 90% say they have fiduciary relationships, either with all clients (61%) or some clients (16%). Another 11% say for some clients they have both a fiduciary relationship and suitability relationship.

Correcting the myths that advice from a fiduciary would cost investors more, price some investors out of the market for advice, or reduce product or service choice for investors, survey participants say a traditional fiduciary standard does not cost investors more, reduce product or service choice, or price some investors out of the market for advice compared to a broker operating under a less stringent suitability standard. In fact, many participants say the opposite is true, that operating under the higher standard can save clients money over the long-term.

Participants indicate that extending the fiduciary standard:

• Would not cost investors more for advice (79%).
• Would not price investors out of the market for advice (69%).
• Would not limit access to advice or products (68%).

It’s About America’s Retirement
Not only do they want to build trust with their clients, but survey participants understand the impact of advice from a fiduciary to retirement plan participants, including advice on rollovers from 401(k) and IRA plans. Pro-fiduciary, consumer and labor organizations believe there is no more vulnerable point for a retirement investor than when advice is given on money rolled over from a retirement account.

The survey asked, “Should the fiduciary standard apply to investment advice on rollovers from 401(k) or IRA accounts?” Once again this year, 79% overall agree that the fiduciary standard should apply to rollovers. This includes 91% of RIA/IARs, 61% of registered reps, and 63% of dual registrants.

Moreover, there is across-the-board agreement that the same fiduciary standard that applies to 401(k) plans should also apply to advice on IRA accounts. Overall, 72% of respondents – up from 70% in 2012 – and across every registration category and compensation model, agree.


Survey participants also agree that investors do not have the information they need to choose of the type of advisor or sales relationship they want. Much more needs to be done to clarify roles of intermediaries, through titles, firm purpose and disclosure. However, disclosure alone will not do. When selecting a financial intermediary:

• 97% say investors don’t understand the differences between brokers and investment advisers.
• 72% say the titles “advisor,” “consultant,” and “planner” imply a fiduciary relationship exists.
• 82% say disclosures alone are not sufficient to manage conflicts of interest.

To see the findings of the 2013 survey, please click here.

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