Investors believe everyone who provides financial advice is already a fiduciary, according to a survey released Wednesday by a group of investment adviser and consumer protection groups.
The results of the survey echo those of the RAND study, commissioned by the SEC in 2008 amid debate over an exemption from regulation under the Investment Adviser’s Act of 1940 for broker/dealers. But today’s results answer directly many of the questions that the SEC has been charged with investigating under the Frank-Dodd legislation. And they are up to date.
“The context has changed,” said Barbara Roper, director of investor protection for the Consumer Federation of America, on a conference call scheduled to discuss the results. “The SEC is specifically directed by Congress to answer this question. And this provides an up to the date response. There is no big surprise in terms of the results of the survey. It’s possible the SEC would have relied on prior studies. But Congress knew about the existence of these studies and still asked the SEC for further study,” she said.
The one thing that is new and different in the NASAA study is that it shows investors think even insurance agents should be subject to the fiduciary standard when they provide advice to clients. “Today’s strongest opposition [to a mandated fiduciary standard for all brokers who provide retail advice] is coming from the insurance community. So we asked specifically what we had not done in the past. Does the public feel insurance agents should be held to this same standard?” said Roper. The answer was yes.
Some of the key takeaways: Nine out of 10 U.S. investors think that a stockbroker and an investment adviser who provide the same services should have to follow the same investor protection rules. (Supporters of this point include 92 percent of households with over $100,000 or more in assets and 90 percent of college graduates.) Nearly all U.S. investors (97 percent) agreed that financial professionals should put their clients’ needs first and disclose all fees and conflicts. And nearly all U.S. investors (96 percent) agree that the fiduciary requirement should extend to insurance agents selling investments.
But there is still a lot of confusion about who is actually held to a fiduciary standard, the survey found. Three out of five U.S. investors think insurance agents do. Two out of three U.S. investors think stockbrokers do. And 76 percent of investors think that all financial advisors (a term used to describe brokerage firm salespeople) do. Meanwhile, 75 percent think that financial planners are held to a fiduciary standard and 77 percent say investment advisers are.
Only 29% understand that the primary function of stockbrokers is to buy and sell investments to clients, and only present limited advice.
The survey received 1,319 responses and was weighted by age, region, gender and race so that the results would more accurately represent the opinions of American investors. The study was conducted by infogroup/ORC and was commissioned by NASAA, the state securities regulator group, the Consumer Federation of America, AARP, the Investment Advisor’s Association and the Certified Financial Planner Board of Standards. Together they submitted the results to SEC staff and commissioners including SEC Chairman Mary Schapiro.
Where possible the results for some questions were compared to those from similar surveys of investors conducted in 2004 and 2007. You can see the full results of the survey here.