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August 01, 2007 at 04:00 AM
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.
