Advisors have been repeatedly polled and lectured about the now-uncertain Department of Labor new fiduciary standard. But how do clients feel?
A recent J.D. Power survey finds that a delay and even a weakening of the standard would suit most of them just fine.
Almost 60% of investors paying commissions say they either “probably will not” (40%) or “definitely will not” (19%) stay with their current firm if they must move to fee-based retirement accounts.
“While [J.D. Power’s] annual Full Service Investor Satisfaction Study supports the intuitive hypothesis that current fee-based investors are generally more satisfied with what they pay their firm than those who pay commissions, findings of J.D. Power’s DOL Special Report show there is significant resistance among those commission-based clients — especially the high net worth — to being forced to migrate to fees,” said Michael Foy, director of the research firm’s wealth management practice, in the report.
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In fact, the group’s February poll finds that a quarter, or 25%, of high-net-worth investors “definitely would not” switch to a fee-based account if it had a 1% fee. More than half, or 52%, of investors with $1 million or more in investable assets “definitely would not” move a fee-based account that charges 2%.
They are not alone. Many other, generally younger investors also are not likely to move to fee-based accounts. In fact, 61% say they are not likely to make such a move; 35% state they “probably would not” switch, and 26% state they “definitely would not” do so.
Among the large wirehouse firms, Morgan Stanley and Wells Fargo say they intend to keep commission accounts as options for retirement account investors. Merrill Lynch, which originally said it intended to abandon such accounts, is now reconsidering this stance.
IRA assets total close to $8 trillion, the Investment Company Institute says. The fiduciary rule is expected to affect about $3 trillion in client assets and $19 trillion in wealth management industry revenue, according to Morningstar research.