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September 15, 2010 at 01:12 PM
Advisory and consumer trade groups released a joint survey on Wednesday which shows that the majority of investors are confused about which type of advisor is required to act as a fiduciary on their behalf, and that the majority of investors believe all financial professionals providing investment advice—including insurance agents–should be held to a fiduciary standard.
The joint study performed by the ORC/InfoGroupwas released by the Consumer Federation of America (CFA), American Association of Retired Persons (AARP), the Investment Adviser Association (IAA), the Financial Planning Association (FPA), the CFP Board, the North American Securities Administrators Association (NASAA), and the National Association of Personal Financial Advisors (NAPFA). The phone-based survey of 1,319 investors conducted August 19-23, found that nine out of 10 U.S. investors (or 91%) believe a stockbroker and an investment advisor who provide the same kind of investment advisory services should have to follow the same investor protection rules.
“Investors don’t understand the difference [between advisors and brokers] because the differences no longer make any sense,” says Barbara Roper, director of consumer protection for the CFA. “Investors view [advisors and brokers] as indistinguishable; the clear conclusion is that you have to regulate them accordingly, and that means applying the Advisers Act fiduciary duty to their advice and recommendations about securities.” Roper says the survey results were submitted today to the SEC, and individual copies of the survey results were also sent SEC Chairman Mary Schapiroand the SEC Commissioners.
On a conference call with reporters on Wednesday to discuss the findings, Roper said that the survey results answer two questions that Congress, under the Dodd-Frank Act, asked the Securities and Exchange Commission to address: whether retail investors understand the differences between brokers and advisors, and whether the existence of different standards for brokers and advisors are confusing. As the survey results revealed, Roper said, Investors “don’t understand the different services that are offered by brokers and advisors.”
Denise Voigt Crawford, Texas Securities Commissioner and the immediate past president of NASAA, told reporters on the call that “investors who receive advice about securities logically think that their interests come first.”
(See Crawford's latest blog posting on AdvisorOne.com)
Chief among the survey findings were that:
* Nine out of 10 U.S. investors (91%) think that “a stockbroker and an investment adviser (who) provide the same kind of investment advisory services … should have to follow the same investor protection rules.”
