Investors "clueless" about fiduciary duty
A study released Wednesday by the Consumer Federation of America, AARP, the North American Securities Administrators Association and various investment advisor and financial planning organizations has found that investors overwhelmingly support a universal fiduciary standard and, at the same time, are very confused about which financial professionals are now held to it.
The poll questioned 2,012 Americans, 1,319 of whom identified themselves as investors. The investment questions were asked only of investors.
The poll found that 9 out of 10 investors believe that a stock broker and an investment advisor who provide the same investment advisory services should have to follow the same investor protection rules.
Nearly all, 97 percent, agreed that investors' best interests should be the priority. Eighty-five percent believe that financial professionals should disclose conflicts of interest and the source of any commissions they might receive.
Again almost unanimously, 96 percent of Americans polled believe that insurance agents should be held to the fiduciary standard.
The majority of people polled were unsure which investment professionals have a fiduciary duty to their clients.
Three out of five believe insurance agents are held to a fiduciary standard.
Two out of three believe stock brokers are held to a fiduciary standard.
In a press conference this afternoon, Barbara Roper, director of investor protection at the Consumer Federation of America denounced the policies that enabled a double standard for investment professionals.
"This survey confirms that investors are clueless when it comes to the different standards of care that apply to brokers and investment advisers. This lack of understanding is not because investors are stupid. It is because, bluntly stated, the policy itself is stupid," she said.
"No one in their right mind would create a system in which individuals who call themselves by titles and offer services that are indistinguishable to the average investor are subject to two different standards when they do so," said Roper.
The results of the survey will be given to the SEC as they consider instituting a universal fiduciary standard on all financial professionals. Their decision is expected in January.
The Dodd-Frank Act stipulated that the SEC study the issue for 6 months following the enactment of the consumer protection bill – despite the fact that multiple independent surveys have been done on the issue, all coming to the same conclusion. The survey released today repeated questions asked in 2004 and 2007.
One (high) standard for all investment professionals seems like a no-brainer but some in the financial services industry still oppose it.
The benefit for investors is obvious and, in my opinion, any opposition is indefensible. Those who are against a fiduciary standard want to continue fleecing consumers with impunity.
But, what do you think, should all investment advisors, brokers and insurance agents be held to the same standard?
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