Since the recent passage of the Department of Labor’s Fiduciary Rule, there’s more scrutiny on advisor fees than ever before. Investment firms and advisors are busy re-tooling to comply with the new legislation, examining their fee structures and contemplating how the changes will affect customer relationships and product sales.
But it turns out that most Americans either believe they don’t pay anything for their financial products, or have no idea what they do pay, according to a study by Hearts & Wallets, a financial research organization that looks at consumer savings and investing behaviors. “Wants & Pricing: What Investors Buy & Competitive Ratings” shows, in fact, that nearly one-third (31 percent) don’t know what they pay for their financial products.
Laura Varas, founder and CEO of Hearts & Wallets, explains why it’s problematic that so many investors are in the dark about costs and fees.
“Everyone knows nothing is free in life,” Varas says. “When you add together the Americans who say they don’t know what they pay for their financial products and the high number of people who say they pay nothing for products that they obtain through their retail financial stores, we have a major problem. Consumers should know what they pay. Some consumers want to pay more for things they want, such as higher service levels, while others do not. The industry has a responsibility to price clearly, and should embrace price clarity enthusiastically by laying out the different choices available to consumers. Regulation has a role, but in the end, there’s no substitute for an informed consumer.”