Regardless of the eventual fate of the Department of Labor’s fiduciary rule, studies indicate that a fiduciary standard is consistently rated among the top three most important factors that draw an investor to work with an advisor.
For the third year in a row, Jefferson National’s “Advisor Authority” study has borne that out, and this year it also shows that nearly half (48 percent) of investors say they would stop working with their financial advisor if they learned the advisor is not legally required to serve clients’ best interest.
New as it is, all the uproar of the DOL fiduciary rule appears to have raised awareness among investors that not all advisors are fiduciaries, since 59 percent of investors say they incorrectly believed that all financial advisors are already required by law to put their clients’ best interest first, including disclosing fees and conflicts of interest.
So the news that, until the fiduciary rule’s implementation, such was not the case—that financial professionals were already required to act as a fiduciary when advising clients on their retirement accounts—had to be a disturbing revelation.
Advisors are on the same side as those clients and recognize the importance of a fiduciary standard, according to the study.
In fact, the study, which polled RIAs, fee-based advisors and individual investors across the country, found that when investors choose an advisor and when advisors are building their practice, a fiduciary standard is a key consideration.
In previous iterations, the study has shown that a fiduciary standard is consistently rated among the top three most important factors influencing an investor to work with an advisor.
But, interestingly, even though investors rank a fiduciary standard so highly, only 38 percent are aware of the DOL’s fiduciary rule.
More advisors, of course, are up on the rule—although even there, just 84 percent say they’re aware of it.
And this year’s study finds that 83 percent agreed that a fiduciary model will benefit the growth of their practice, regardless of the status of the DOL fiduciary rule.
Since attracting new clients has been consistently rated by advisor respondents as their top driver of growth (53 percent in 2017, 56 percent in 2016), that bodes well for the fate of a fiduciary standard. As important as it is to investors in choosing an advisor, it follows that it will be important to advisors too.