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Ninety-Three Percent of Americans Think Financial Advisors Should Be Fiduciaries Despite Increasingly Uncertain Future of the Conflict of Interest Rule, Financial Engines Survey Shows
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More than half would take action if they discovered that their financial advisor was not a fiduciary

SUNNYVALE, Calif.--(BUSINESS WIRE)--Apr. 18, 2017-- While the fate of the U.S. Department of Labor’s conflict of interest rule (also known as the fiduciary rule) grows increasingly uncertain and more complex with its recent delay until June 9th, a new survey from Financial Engines (NASDAQ:FNGN), America’s largest independent investment advisor,1 shows that Americans overwhelmingly favor the intent of the rule. According to the survey, 93 percent of Americans think financial advisors who provide retirement advice should be legally required to put their clients’ best interest first. However, more than half of respondents (53 percent) mistakenly believe that all financial advisors are already legally required to put the best interests of their clients first.

Compared to a similar survey last year, Americans have a slightly better understanding of the difference between a financial advisor who is a 'fiduciary' and one who is not (21 percent understand the difference today, compared to 18 percent a year ago). However, many Americans still don’t know how to tell if an advisor is a fiduciary. Only 50 percent of investors who work with a financial advisor are certain that their advisor is a fiduciary, while 38 percent don’t know if their advisor is a fiduciary or not.

“The bar is rising. Once people understand the benefits of working with a fiduciary, they want one on their side,” said Christopher Jones, chief investment officer at Financial Engines, who testified before Congress in support of the conflict of interest rule in 2015. “Consumers want to know that they can trust their financial advisors.”

Investors Threaten Action

According to the survey, if investors discovered their financial advisor was not a fiduciary, many would take action. Respondents said that they would ask more questions about their advisor’s investment recommendations (47 percent), switch to another advisor (23 percent) or stop working with a financial advisor altogether (18 percent). Only 12 percent would continue working with the same advisor in the same capacity. Sixty percent are receptive to having outside help to determine which financial advisors would put their best interest first.

“Many financial firms and advisors parse their words carefully to give the appearance of being a fiduciary, even when they are not,” said Jones. “While the debate over the conflict of interest rule has raised consumer awareness about this important standard, investors must still be careful to demand advisors that act in the sole best interests of their clients.”

Knowing What to Ask

Despite the complexity and lack of clarity on the fiduciary rule, Financial Engines believes consumers can determine whether an advisor will act in their best interest by asking a few key questions:

  • Are you a fiduciary? A direct question deserves a direct answer. Pay attention to how the advisor responds. If your advisor has told you that he or she is acting as a fiduciary, ask them to show that to you in writing.
  • Do you receive any type of compensation in addition to what I’m paying you? Some advisors receive commissions or other product-based compensation when they steer clients into particular investment products (including mutual funds, annuities, and variable annuities). This is a clear conflict of interest and can indicate that the advisor is not, in fact, a fiduciary. Make sure your advisor is providing unbiased advice, and not simply selling you investment products.
  • Are you “dual-registered”? Some advisors are registered as both investment advisors and broker-dealers. Generally, a broker-dealer is acting in the role of salesperson. If your advisor is also a broker-dealer, make sure you understand which hat they are wearing when providing advice to you.
  • Have you ever been cited by a professional or regulatory body for disciplinary reasons? To be extra sure, you can look up the advisor’s records on FINRA’s BrokerCheck to find out if they have any complaints—especially complaints related to providing financial and advisory services.

“The bottom line is that investors need to be careful in selecting an advisor,” said Jones. “Make sure the advisor is required to act in your best interests as a fiduciary before you trust them with your hard-earned money.”

Additional highlights from the survey include:

  • More than half of consumers (53 percent) feel that investment advisors should be regulated by the federal government.
  • Only 15 percent of Americans surveyed think that employers should be allowed to offer services from advisors who are not fiduciaries.
  • When asked who they believe stands to benefit from the fiduciary rule the most, the highest percentage (28 percent) say average-income investors.

Results of the survey can be found at https://financialengines.com/workplace/resources.

About Financial Engines

Financial Engines is America’s largest independent investment advisor. We help people achieve greater financial clarity by providing comprehensive financial planning and professional investment management and advice. Headquartered in Sunnyvale, CA, Financial Engines was co-founded in 1996 by Nobel Prize-winning economist William F. Sharpe. We currently offer financial help to more than 9 million people across over 700 companies (including 146 of the Fortune 500). Our unique approach, combined with powerful online services, dedicated advisors and personal attention, promotes greater financial wellness and helps more Americans to meet their financial goals.

For more information, please visit www.financialengines.com.

All advisory services provided by Financial Engines Advisors L.L.C. Financial Engines does not guarantee future results.

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding the use of professional investment and financial planning help, which involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are outlined in our SEC filings. You are cautioned not to unduly rely on these forward-looking statements, which speak only as of the date of this press release. Unless required by law, Financial Engines undertakes no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to report the occurrence of unanticipated events.

1 For independence methodology and ranking, see InvestmentNews Center (http://data.investmentnews.com/ria/).

Source: Financial Engines

Financial Engines
Mike Jurs, 408-498-6590
mjurs@financialengines.com
or
Allison+Partners
Alexandra Gardell Kreuter, 646-428-0618
financialengines@allisonpr.com