Remember the scene near the beginning of the play and film “Amadeus,” where the great Antonio Salieri, court composer to Emperor Joseph II of the Holy Roman Empire, anxiously waits his first meeting with the man who wrote the greatest music he’s ever heard? Then Mozart shows up as a loud, garish, silly, and profane boy.

That scene popped into my mind recently as I was reading the latest correspondence from NAPFA. I try, I really do, to keep in mind that NAPFA virtually single-handedly converted the multi-trillion dollar financial services industry to fee compensation; that it is the only advisory organization that requires its members to have a fiduciary duty to their clients; and that it has led the way toward a profession of financial planning since its inception in the early ’80s. Over the years, I’ve been one of NAPFA’s biggest fans–but I still keep getting this young Mozart image. I’ll tell you what happened and you decide if I’m a few funds short of a portfolio.

Who Knows What Fiduciary Means?

A couple of months ago, I got an e-mail from a NAPFA board member highly laudatory of her organization’s latest initiative, including a May 4 press release about it. The tout quickly got my attention. The title was “Consumers Understand ‘Fiduciary,’” and it went on to ask: “Do consumers really understand what a fiduciary standard means in the financial services industry?” The answer was provided by the then-chair of NAPFA, Dick Bellmer, who proclaimed, “Based on the data we have collected, the average investor clearly understands the importance of a fiduciary standard.”

Now that, I said out loud, is news. You see, I’ve spent nearly 25 years covering the financial services industry, including five years talking with consumers at Worth magazine. My experience is that most financial consumers wouldn’t know a stock dividend from an insurance premium and believe that stockbrokers are on their side. If they do indeed understand what a “fiduciary” is, we have indeed come a long way, baby.

At this point, I must admit to having been in a quandary: As a vocal advocate of a fiduciary standard for professional financial advisors for more years than I can remember, the implications of consumers finally recognizing the benefits of fiduciary advice would be nothing short of industry shaking. As a skeptical journalist, though, it seemed perhaps too good to be true. In my heart of hearts I wished it were so, but asked for a bit more information about such little items as who conducted the survey, how were the questions worded, and just how were these Einsteinian respondents selected?

Well, after about a month of no further information, I pressed on, and finally received what appears to be a PowerPoint presentation of the survey results. Here’s what I found.

Mystery Solved

First of all, according to the survey overview: “NAPFA conducted a random, Web-based survey of more than 900 consumers…” So far so good. Then, under “methodology” it explains: The Web-based survey was made available to 25,000 active subscribers to NAPFA’s Planning Perspectives, an electronic, quarterly newsletter designed for consumers. Say what? This “random” survey was sent to people who regularly get a newsletter from NAPFA? I started getting a queasy feeling.

It got worse. The survey only asked 11 questions, nine of which were revealed in the presentation. Of those, five were demographic questions about the 922 respondents, leaving only four of interest. The first asked: “Have you heard the term fiduciary before?” Along with a very blue pie chart, the presentation said: “Surprisingly, 92% of participants have heard the term ‘fiduciary’ before.” Surprisingly? If you asked 10 people on the street and five of them had heard of “a fiduciary,” that would be surprising. But 92% of the subscribers to a NAPFA newsletter? What’s surprising is that the other 8% didn’t know the term.

That NAPFA is possibly among the worst marketers on the planet was further attested by the fact that 57% of the respondents didn’t have a financial advisor. That’s right: more than half of the subscribers to a NAPFA newsletter don’t use a financial advisor. It’s just a thought, but maybe NAPFA might want to work on its message a little more.

To the question: “If you use a financial advisor, has he/she used the term ‘fiduciary’ in describing how he/she provides services to you?,” 37% answered yes. From that NAPFA concluded: “…financial advisors, if they are in fact held to a fiduciary standard, are doing a poor job of communicating this standard to their clients.” Now, since far fewer than 37% of “advisors” are in fact fiduciaries, it would seem that the newsletter’s subscribers included a disproportionate share of NAPFA members, which is to be expected. So it seems likely that all 37% are NAPFA members who are doing a fine job of pitching their fiduciary status. Point is, if you wanted to find out whether fiduciary advisors were in fact talking to their clients about their fiduciary status, you should probably start with a group of clients of fiduciary advisors. No?

The third question and its conclusion are my favorites: “Is NAPFA’s definition of fiduciary understandable to you?” The survey then showed participants a written version of NAPFA’s definition of fiduciary. The conclusion is priceless: “An astounding 98% of those surveyed understand this definition of fiduciary.”

Where to Begin?

I know, I know. This is like shooting fish in a barrel. But I can’t help myself. The hard part is knowing where to start. Let’s see: I’m not a professional pollster, but I suspect that showing folks a sentence and then asking them whether they understand it may not be considered valid evidence that they do in fact really understand it. It’s even possible that people would say they do understand it, even when they don’t, because they don’t want to look stupid (unlike the creators of this survey).

And finally, our intrepid surveyors asked: “Based on NAPFA’s definition of fiduciary, are you more inclined to work with a financial advisor who adheres to a fiduciary standard?” Not surprisingly, 97% said yes. Their conclusion? “NAPFA has always believed that consumers are more aware of the need for a fiduciary standard than many in the financial services want to believe.”

Yet there are some 300,000 stockbrokers in the U.S. compared to a couple of acorns over 1,000 NAPFA members. The inescapable conclusion for anyone looking at the financial services industry and its marketing machine is that financial consumers–middle class and affluent–are completely ignorant of the fact that their stockbrokers or insurance agents are not fiduciaries, and have no legal obligation to put their clients’ interests ahead of their own or their firm’s.

Of course 97% said they wanted a fiduciary advisor. What the geniuses at NAPFA forgot to ask is to whom those respondents believe they can turn to get it? The numbers tell the whole story: how many fiduciary advisors are there in the U.S.? Maybe 15,000. How many clients do they have? At 200 clients each, call it 3,000,000. If 300,000 stockbrokers have 200 clients each (and we know they have way more than that), that’s 60 million. Does anybody honestly believe these 60 million clients know that their broker is a salesperson not a fiduciary advisor, but make the conscious choice to work with the former instead of the latter?

I have two problems with NAPFA’s absurd, self-serving study: First, they are the good guys. But when they offer “objective” information like this that is so obviously skewed to their own agenda, they appear either really dumb or so arrogant they believe the rest of us are idiots.

More important, fake studies like this one, with unsound data and faulty conclusions, put people who are trying to do the right thing on the wrong track. The problem is that for over a hundred years, the financial services industry has gotten away with a fraud: acting like “advisors” but being compensated as salespeople. Today, consumers are slowly getting the message: the investment banking scandals earlier in this decade reveal how Wall Street really works. The FPA’s suit to stop the Merrill Lynch rule further pulled back the curtain on the charade. It’s time for NAPFA to step up, and use some of that PR prowess that convinced the country that fees were better to show consumers the difference between fiduciary advisors and everyone else, rather than trying to make each other feel better. Oh, and while you’re at it, try to act a little less like Amadeus.


Bob Clark, former editor of this magazine, surveys the advisory landscape from his home in Santa Fe, New Mexico. He can be reached at rclark7000@aol.com.