Do consumers really understand what a fiduciary standards means in the financial services industry? And, perhaps more importantly, do they even care? A new survey from the National Association of Personal Financial Advisors (NAPFA) was unveiled recently at its annual convention in Chicago and it certainly answers those two questions.
In the survey, 922 consumers from 48 U.S. states and six foreign countries said they do understand the fiduciary issue and they prefer advisors who adhere to a fiduciary standard. Incidentally, the survey, entitled 2007 Consumer Understanding of a Fiduciary Standard, was conducted from December 11, 2006 to February 28, 2007.
In the survey, some 92 percent of the respondents answered that they have heard the term “fiduciary” from a variety of sources. Since 57 percent of those surveyed are not presently working with a financial advisor of any kind, NAPFA says it is apparent that the fiduciary message is gaining widespread attention among consumers. NAPFA defines a “fiduciary standard” as:
A financial advisor held to a Fiduciary Standard occupies a position of special trust and confidence when working with a client. As a Fiduciary, the financial advisor is required to act with undivided loyalty to the client. This includes disclosure of how the financial advisor is compensated and any corresponding conflicts of interest.
“Based on the data we have collected, the average investor clearly understands the importance of a fiduciary standard,” says NAPFA National Chair Dick Bellmer. “People want to be treated fairly and honestly. They do not want to worry about the motivations or loyalty of their financial advisor. A fiduciary standard is the only way for advisors to minimize the worry and concern consumers may have about working with them.”
NAPFA points out that notwithstanding all this, consumers are still often ill served by advisors who are not explaining the term “fiduciary” to them, or not discussing their importance. The survey, it says, reveals that 34 percent of respondents indicate that their financial advisor did not explain the term to them.
“It’s possible that the consumers who have not discussed the term with their financial advisor are working with an advisor who is not upholding a fiduciary standard with the client,” adds Bellmer. “That advisor would not want to highlight the difference.”
NAPFA is an organization of financial planners formed in 1983 and who provide fee-only advice to consumers. If you are interested in obtaining copy of the survey, contact Benjamin.firstname.lastname@example.org.
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