While the debate over whether to extend the fiduciary standard of care to all advisors who provide advice to individual investors continues in regulatory, broker-dealer and insurance company boardrooms, advisors in the field are skewing toward putting the investor first, even when it comes to advice under a more stringent ERISA fiduciary rule, according to the 2013 fi360-AdvisorOne Fiduciary Survey.
For the third year, fi360 and AdvisorOne have joined forces to survey attitudes of financial advisors of all types on the fiduciary standard. Highlights of the 2013 survey, which was conducted in February and March, are being announced Thursday at the 2013 fi360 Conference in Scottsdale, Ariz.
More than 84% of participants say there should be clearer differentiation between product providers and advice providers. This includes a majority in every advisor category: RIA/IAR, Registered Rep, Dually Registered as well as Insurance consultants and insurance producers, who for the first time this year participated in the survey.
In addition, 72% believe the titles “advisor,” “consultant” and “planner” imply that a fiduciary relationship exists. Here again, there is a clear majority in every advisor category.
This is a fascinating result because there is broader participation by registered reps than last year, and because of the insurance consultants and producers.
This broader mix of advisors makes it a bit more challenging to compare some results year over year. The percentage of insurance producers and insurance consultants participating in the survey is small relative to investment advisors, registered reps and dual registrants. What is more surprising and makes the data more compelling is that the insurance participants tended to agree with RIA/IARs more often than with registered reps.
Participants by Registration Type:
RIA/IAR |
Registered Rep. |
Dually Registered |
Insurance Producer |
Insurance Consultant |
|
2013 |
53.1% |
15.5% |
28.5% |
1.7% |
1.1% |
2012 |
54.5 |
9.9 |
35.6 |
na |
na |
1. Does Fiduciary Advice Cost Investors More?
2013 survey participants dispel the myths about advice that is in the investor’s best interest somehow costing more. Insurance companies and BDs have lobbied against the fiduciary standard for advice to investors, saying it would cost investors more and limit their access to advice. Yet, participants clearly disagree, as they have in each of the three years the survey has been conducted.
- 79% say it does not cost investors more to work with fiduciaries than brokers.
- 69% say a fiduciary standard of care would not price some investors out of the market.
- 69% also say a fiduciary duty for brokers would not reduce product or service choice for investors.
- 100% of insurance consultants and producers gave the same answers to the questions above
2. Investor Knowledge—Can They Bridge the Gap?
Once again, 97% of participants say investors do not understand the difference between brokers and investment advisors.
In addition to not understanding those material differences, it’s no surprise that individual investors would not be expected to achieve the level of specialized investment knowledge a professional advisor would acquire.
When asked about the “gap in the knowledge base between professional advisors and individual investors regarding investments and financial services,” 69% of participants say that ordinary investors cannot bridge this gap.
“Does this knowledge gap make fiduciary advice much more important to ordinary investors?” Yes, say an even higher 83% who took the survey.