Investors are “Clueless” as to Who Operates Under “Fiduciary Standards”

The poll of 1,319 investors conducted by ORC/Infogroup revealed a population of investors who are largely confused about which financial professionals are required to operate under a “fiduciary standard,” requiring the financial professional to put their client’s interest ahead of their own.    

Such unanimous replies are not common in surveys, but 97% of investors agree that “when you receive investment advice from a financial professional, the person providing the advice should put your interests ahead of theirs and should have to tell you upfront about any fees or commissions they earn and any conflicts of interest that potentially could influence that advice.” 

Likewise, investors often think they are getting fiduciary advice, when that is not necessarily the case: 

• Three out of five U.S. investors mistakenly think that “insurance agents” have a fiduciary duty to their clients.   
• Two out of three U.S. investors are incorrect in thinking that stockbrokers are held to a fiduciary duty.   

Barbara Roper, director of investor protection, Consumer Federation of America, said:   

“This survey confirms that investors are clueless when it comes to the different standards of care that apply to brokers and investment advisers.   They don’t even understand the differences between brokers, investment advisers, and financial planners, let alone that they are subject to different legal obligations to the client when they perform the same services.  This lack of understanding is not because investors are stupid; it is because, bluntly stated, the policy itself is stupid.  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.  But this is precisely the world that SEC policy over the past two decades has helped to create.  Now, Congress has given the SEC a chance to fix those past errors by adopting a policy that makes sense to investors and puts their interests first. ”