Close Close
ThinkAdvisor

Portfolio > Portfolio Construction > Investment Strategies

What's in an Investor's Best Interest? Depends on Who You Ask: Dalbar

X
Your article was successfully shared with the contacts you provided.

What You Need to Know

  • Little difference was found between male and female participants compared with other breakdowns.
  • Respondents over 45 place far more importance on their best interests than their younger counterparts do.
  • Multi-member households put much greater value than single households on not making changes that affect their financial plan.

Dalbar’s Best Interest Spread Analysis, released Friday, examines how investment professionals can perform in the best interest of investors.

In a survey, Dalbar asked a representative sample of investors to report what they considered in their best interest, and analyzed how those interests vary based on age, gender, geography and income

In aggregate, the survey showed which interests these investors considered most important. This produced a scoring of the interests by importance. 

The major conclusion from this work was that interests as defined by investment professionals are not in sync with what investors considered to be in their best interest. 

Key Findings

The analysis found that male and female participants exhibit little difference when compared with other breakdowns. The largest spread came on ensuring that the investor pays only for the services actually used.

The survey found that mature respondents, those over 45, place far more importance on their best interests than their younger counterparts do, and that considerable differences exist among the older generations. 

More on this topic

Accordingly, Dalbar said, older respondents require more careful attention to discover what is in their best interests. Any uniform or standardized definition of what these are is inappropriate.

Single and multi-member households have many areas of similarity but also great divergence, according to the survey. The similarities include permission for penalty-free withdrawals, subject to IRS rules, in the event of economic hardship, and using reliable technology. 

As for the biggest difference, multi-member households put a much greater value than single households on not making changes that affect their financial plan.

In terms of location, the survey found that residents in the western U.S. are more concerned about retirement income, while their Eastern counterparts are more focused on reliable technology, fees and access to funds. 

Dalbar said its analysis of the best interest survey results illustrates how diverse the best interests of the population are. For there to be any hope of achieving the promise of acting in an investor’s best interest, it is essential to examine investors’ view of what is in their best interest.