Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, September 15, 2010

Survey Finds that Investors are Confused about Fiduciary Duty Standard

A coalition of consumer and investment adviser groups, including Consumer Federation of America, AARP, and NASAA, released a survey of 1319 investors conducted by ORC/Infogroup that shows that most U.S. investors are confused about which financial professionals are required to operate under a "fiduciary standard" requiring the financial professional to put their client's interest ahead of their own. At the same time, the vast majority of U.S. investors believe that all financial professionals providing investment advice should be required to operate under such a pro-investor standard, according to the new survey.

The SEC is currently conducting a study on the obligations of broker-dealers and investment advisers, as required by the Dodd-Frank Act.

Chief survey findings include the following:

•  Nine out of 10 U.S. investors (91 percent) think that "a stockbroker and an investment adviser (who) provide the same kind of investment advisory services … should have to follow the same investor protection rules." 
•  Nearly all investors (97 percent) agree that "when you receive investment advice from a financial professional, the person providing the advice should put your interests ahead of theirs and should have to tell you upfront about any fees or commissions they earn and any conflicts of interest that potentially could influence that advice." 
•  Nearly all U.S. investors (96 percent) agree that the fiduciary requirement should extend to insurance agents selling investments. 
•  At the same time, there is widespread misunderstanding about which financial professionals are held to the fiduciary standard:
 ♦ Three out of five U.S. investors mistakenly think that "insurance agents" have a fiduciary duty to their clients. 
 ♦ Two out of three U.S. investors are incorrect in thinking that stockbrokers are held to a fiduciary duty. 
 ♦ 76 percent of investors are wrong in believing that "financial advisors" – a term used by brokerage firms to describe their salespeople -- are held to a fiduciary duty.
 ♦ By contrast, 75 percent of investors think the fiduciary standard is in place for "financial planners" and 77 percent say the same about "investment advisers."

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