Many Americans have misconceptions about financial advice, in particular about whether their best interest is being served, according to research released Wednesday by the digital advisor Personal Capital.
Forty-eight percent of investors in Personal Capital’s 2019 financial trust report believed that all financial advisors were required by law to always act in their clients’ best interest, and 65% of those who worked with an advisor believed that all financial advisors recommend only what is in a client’s best interest, up from 46% who said this in 2017.
Neither notion is correct, Personal Capital said.
The definition of “best interest” — the focus of continuing debate among regulators — may be adding to investors’ increased confusion, it said.
“While we hope all financial services professionals and firms are working with Americans’ best interests in mind regardless of fiduciary designations, this simply isn’t the case,” Jay Shah, Personal Capital’s chief executive, said in a statement.
“When it comes to wealth management, anything less than advice that meets the fiduciary standard simply isn’t acceptable. Investors deserve more.”
The study was based on an online Caravan survey conducted by Engine in December among 1,004 men and 1,003 women 18 and older.
The survey found that although 30% of respondents thought a financial advisor was likely to take advantage of a consumer, 97% trusted that their own financial advisor would act in their best interests.
At the same time, 18% of investors were unable to say whether their advisor was a broker-dealer or a fiduciary. Personal Capital said the 26% who indicated their advisors were broker-dealers should reconsider whether they are receiving unbiased financial advice.