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
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
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
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
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.
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/).
View source version on businesswire.com: http://www.businesswire.com/news/home/20170418005420/en/
Source: Financial Engines
Mike Jurs, 408-498-6590
Gardell Kreuter, 646-428-0618