While the financial advice industry wrangles with regulators and lawmakers over a universal fiduciary standard, most investors are far more concerned about getting their phone calls returned.
According to a J.D. Power and Associates survey released last Thursday, 85% of 4,200 full-service investors say they have never heard of — or don't understand the difference between — the suitability and fiduciary standards.
The Securities and Exchange Commission has recommended to Congress a rule change that would place broker-dealers under the tighter fiduciary standard. Currently, only investment advisers must adhere to that more onerous requirement.
But investors don't seem very concerned about the different standards.
Among full-service investors whose financial advisers adhere to the fiduciary standard, 57% said that this increased their comfort level. Then again, 42% said that it decreased their level of comfort.
The survey also showed how clients rate their advisory firms. RBC Wealth Management received the highest rating from clients.
Although clients appear confused about fiduciary standards, they do have a very clear idea of what they want from their adviser. Most are focused on how often they hear from their representative or adviser, and whether they get the information they need.
“There is a growing expectation for outreach” among investors, especially since the market downturn battered their portfolios over the past couple of years, David Lo, director of investment services at J.D. Power and Associates, said in an interview.
The lack of investor enthusiasm about a single fiduciary issue might make firms consider whether it is worth the extra cost of meeting the higher standard, particularly for an imprimatur of which most clients are unaware, he said.The findings suggest instituting a set of best practices that will leave their clients “a lot happier” at little extra cost, said Mr. Lo.
At the top of the list: Clients have clearly indicated that they want more frequent and clearer communication that explains their investments' performance and how fees are charged.
That should be easier than in the past because investors have become much more interested in communicating online, the survey found.
Nearly six in 10 said that they visited their investment firm's website in the past year, up from 52% who said that they did in 2009.
More than half the investors said that they have exchanged e-mail with their adviser this year. In 2008, that percentage was more like 19%.
Among investors who visit their investment firm's website, older investors are far more active. Clients more than 64 years old said they visit the sites more than 35 times a year. Somewhat surprisingly, respondents under 45 said that they only visit their advisory firm's site 12 times a year.
The most common actions on investment company websites are reviewing documents posted by advisers and reviewing tax information. Advisers should take advantage of their investors' online activities and reach out via e-mail and on their websites, Mr. Lo said.
That said, investors also want their phone calls returned, preferably within 24 hours, he said.
Investors also were asked to rank their advisers on factors including investment performance, fees, product offerings and website quality. RBC Wealth Management earned the top score, Charles Schwab & Co. Inc. came in second and
Fidelity Investments ranked third.
E-mail Lavonne Kuykendall at [email protected].
