Why Individual Investors Support Fiduciary Rule: Financial Engines Survey

A survey from the nation's biggest 401(k) advisor found that 93% of Americans want advisors working on retirement accounts to put their client interests first

Department of Labor headquarters in Washington. Department of Labor headquarters in Washington.

While many broker-dealer firms and financial industry trade groups continue to oppose the fiduciary rule developed by the Obama Administration’s Labor Department, individual investors favor it.

According to a new survey from Financial Engines, the nation’s biggest 401(k) advisor, 93% of Americans want financial advisors who provide retirement advice to put their client’s best interests first and be legally required to do so. Slightly more than 50% erroneously believe that this legal requirement already exists.

“Many financial firms and advisors parse their words carefully to give the appearance of being a fiduciary, even when they are not,” said Christopher Jones, chief investment officer at Financial Engines, in a statement.

(Related on ThinkAdvisor: Even Fiduciary Champions Push DOL to Change Rule)

The survey found that only half of investors who work with a financial advisor are certain their advisor is a fiduciary, while 38% don’t even know the fiduciary status of their advisor. That’s a slight improvement from last year’s survey where 41% were uncertain about whether their advisor was a fiduciary.

A bigger difference between the two surveys can be found in the support among individual investors for the fiduciary rule. Last year only 73% favored a fiduciary requirement for advisors working on retirement accounts, far less than the 93% who favor it this year.

“The bar is rising,” said Jones in his statement. “Once people understand the benefits of working with a fiduciary they want one on their side…. Consumers want to know that they can trust their financial advisors.”

And few want to work with an advisor who’s not a fiduciary. In the latest survey only 15% of investors  thought employers should offer services from advisors who are not fiduciaries. Even fewer, 12%, said they would continue working with an advisor if they discovered that the advisor was not a fiduciary.

Perhaps more important for financial advisors working on retirement accounts are the other reactions from investors if they had made that discovery.  Twenty-three percent said they would switch advisors if they found out their current advisor was not a fiduciary and 18% said they would end the relationship.

Financial Engines recommends that investors ask advisors about their fiduciary status and if they receive any compensation, such as commissions, from recommending particular investments. It also recommends that investors ask about whether their advisor is dually registered as an advisor and a broker/dealer and that investors review their advisor’s records on Broker Check.

For its part Financial Engines, which has supported the Fiduciary rule since inception, filed another comment with the Labor Department, which is seeking comment on issues that President Trump raised in his order that essentially delayed its effective date. (The rule is currently due to take effect June 9, with full implementation not required until January 1, 2018, but that could change as a result of the latest comments to the DOL and the Trump Administration’.)

Financial Engines noted that the new, delayed timeline “provides the façade of protection retirement investors” but not actual protection because firms will be not required during the transition period to disclose conflicted investments to retirement investors via the prescribed Best Interest Contract Exemption, a key component of the rule. Looking ahead, Financial Engines notes that 'investors would not be well served by a standard that partially implements impartial conduct requirements, with limited means of enforcement.”

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Even Fiduciary Champions Push DOL to Change Rule

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