As the SEC takes steps toward rulemaking on the fiduciary standard for brokers who hold themselves out as advisors, and the Department of Labor prepares to extend fiduciary requirements to cover more brokers who work with retirement account holders, fi360 and AdvisorOne have jointly conducted their second annual survey of investment advisors and brokers concerning their attitudes about the fiduciary standard.
In March and April of 2012, 380 advisors from across the business model spectrum took the time to complete the survey, which not only sought their opinions on the fiduciary standard but also gauged their understanding of what such a standard means now, or would mean, to their businesses.
The top-line findings of the 2012 fi360-AdvisorOne.com Fiduciary Survey? Most brokers and advisors agree that investors don’t understand the differences between brokers and investment advisors. They believe that extending the fiduciary standard to brokers would help restore investors’ confidence in—and raise the credibility of—financial services providers. But there may also be a disconnect between the fiduciary duty that many brokers already have assumed and some of their employers and associations that have resisted extending a fiduciary duty to all advice-givers. Key survey findings are delivered here as they are being presented Thursday at the fi360 Annual Conference in Chicago.
- 97% of respondents, up from 96% in 2011, say investors do not understand the differences between brokers and investment advisors
- 65% of respondents believe the fiduciary standard (no less stringent than in the Investment Advisers Act of 1940) would help restore investor confidence in financial service providers
- 70% of respondents believe the fiduciary standard would raise the credibility of financial services providers
The survey was open to all brokers and investment advisors, and gathered information from respondents about their compensation models, registrations and prior registration status. (View the 2011 AdvisorOne-FI360 survey findings here.)
Costs and Choice for Investors
Brokers and advisors in the field say it does not cost investors more to work with an advisor who is a fiduciary than with a broker operating under a suitability standard, and that a fiduciary duty for brokers would not reduce product or service choice for investors.
- 82% of respondents say it does not cost investors more to work with fiduciaries than brokers when all costs to the investor are considered, up from 74% in 2011.
- 72% of respondents indicate a fiduciary duty for brokers would not reduce product or service choice for investors, up from 69% in the 2011 survey
- 72% of respondents say a fiduciary standard of care would not price some investors out of the market for advice, up from 67% last year,
These findings suggest a dichotomy between the attitudes of brokers and advisors in the field and broker-dealer and insurance executives. SIFMA, NAIFA, and the Financial Services Institute have argued against extending the Advisers Act RIA fiduciary standard to brokers, claiming such a standard would entail higher compliance costs, disrupt investor access to advice or products and result in higher costs to end investors.
In the field, however, the responses to the survey (see below) indicate that many brokers say they already consider themselves to be in a fiduciary relationship with their clients, regardless of whether they feel supported to do so by their home offices.