Spotting trends in financial services can be an interesting task, in part because it can help answer questions advisors may have about how they stack up against their peers. One question that continues to interest advisors and industry observers is what may happen in the industry if there is an extension of the fiduciary standard to all advice givers.
To get some insight from the field, fi360 and AdvisorOne have jointly conducted their second annual survey of investment advisors’ and brokers’ attitudes about the fiduciary standard. Participants in the 2012 fi360-AdvisorOne Fiduciary Survey are an august group. The great majority of respondents—74%—reported that they have more than 15 years of professional experience in the financial industry; 41% of participants said they had more than 25 years of experience.
Fielded in March and April of 2012, the survey was completed by 380 advisors from across the spectrum of advisor business models and affiliations. The survey not only sought advisors’ opinions on the fiduciary standard but also gauged their understanding of what such a standard means now, or would mean, to their businesses.
Key findings in the first report on the survey pointed out that registered reps and investment advisors in the field believe that extending the fiduciary standard would not cost investors more for advice, limit access to advice or products nor price investors out of the market for advice.
In part two, we discussed participants’ attitudes about pending or potential regulation, and assessed their beliefs about some of the myths surrounding the implementation of those regulatory changes.
Here, in part three, we focus on demographic trends from the survey: who manages the most assets, how participants are moving between business models, and how they are compensated.
Models and Supermodels
Survey participants were closely divided as far as current business model: registered investment advisors/investment advisor representatives (RIA/IARs) total 54.5% of participants, an increase from 41.4% in 2011’s fiduciary survey, while a combined 45.5% are registered reps or dually registered (both registered rep and RIA/IAR) in 2012, down from 58.6% in 2011.
However, survey results showed that the number of registered reps dramatically decreased to 9.9% of participants in the 2012 survey, compared with the 22.0% who identified themselves as registered reps in 2011’s survey. Dual registrants constituted 35.6% of respondents in 2012.
Participant Trend One: Toward RIA Model
It is interesting to observe how the progression of advisors between types of registration in our survey indicates a strong trend for advisors to enter the industry as registered reps or dually registered but then change to to an RIA/IAR model, rather than the other way around.
Only about a quarter of advisors who identified themselves as RIA/IARs in 2012 had entered the investment business as investment advisors. The majority, 74.3%, had previously been dual registrants (43%) or registered reps (32%) before making the change to RIA/IAR status.
This migration to the RIA model increases the number of advisors who are adopting the fiduciary model, as RIA/IARs are required to put client’s interests first. But other types of advisors are also, individually, adhering to the fiduciary model. Over all, 63% of participants reported that they have fiduciary relationships with all clients, and breaking that down by compensation type shows 96% of fee-only, 85% of fee-based, 27% of fee/commission and 20% of commission-only participants said they have fiduciary relationships with all clients.