Clients trust their advisers; advisory firms, not so much

Advisers are gaining client confidence even as financial firms continue to score low in the trust department following years of reports about Wall Street abuses

Feb 10, 2013 @ 12:01 am

By Liz Skinner

Advisers are gaining client confidence even as financial firms continue to score low in the trust department following years of reports about Wall Street abuses.

In fact, about 66% of investors said they think their financial adviser is obligated always to act in their best interests, compared with just 28% who said they think financial firms put clients' interests first on the whole, according to a survey by Cerulli Associates Inc. released last week.

“Investors perceive that, "My adviser, Joe, would never steer me wrong,'” said Scott Smith, a director at Cerulli.

Certain advisers — those working for insurance companies, midsize brokerages and wirehouses — appear to be especially successful at forging strong personal relationships and inspiring client trust, he said.

WEAK UNDERSTANDING

But clients' understanding that different standards of care exist for financial professionals appears to be at best weak, at worst backward.

In the survey, 81% of clients of insurance companies and 81% of those from full-service brokerages such as Ameriprise Financial Inc. or Edward Jones said they think their adviser must follow a fiduciary standard, acting in the best interests of the client at all times. About 75% of those working with a wirehouse said they think their adviser must abide by a fiduciary duty.

In reality, most of these clients likely are owed a suitability standard of care, meaning that the adviser must ensure that an investment is consistent with their best interests but not necessarily “the best” option available, Mr. Smith said.

About 65% of clients of independent advisers said they think their adviser must always act in their best interests, according to the survey of 6,000 U.S. investors.

Independent advisers, of course, are most likely to be operating under the fiduciary standard of care.

“The personal relationships are more important to investors at this point than the actual government standard,” Mr. Smith said. “We need to get to a place where investors are getting what they already think they are getting.”

lskinner@investmentnews.com Twitter: @skinnerliz

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

5 tech innovations you can't afford to ignore

Technology innovation is always top of my at Pershing. What does Pershing have on tap for 2018 and beyond.

Latest news & opinion

Small broker-dealers seek legislative relief from annual audits

Bills introduced in House, Senate would remove PCAOB requirement.

Meet our new 40 Under 40s

For a fifth year, InvestmentNews is proud to shine a spotlight on the amazing accomplishments and potential of top young financial professionals.

10 biggest retirement mistakes

Adhere to enrollment deadlines and distribution rules or pay a hefty penalty.

DOL fiduciary rule on brink of death as key deadline passes

Justice Department didn't petition the Supreme Court to rehear the case. A mandate from the 5th Circuit would finally lay the fiduciary rule to rest.

Finra to overhaul broker information system, cut compliance costs for broker-dealers

The move is intended to cut compliance costs for firms as well as make the registration and disclosure process more efficient.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print