Just slightly over a quarter of households (28%) said they believe financial firms regularly considered investors’ best interests when presenting products and services options, said Scott Smith, director at Cerulli, an analytics firm in Boston.
“During the same period, the investors who indicated they believe firms do not look out for their best interest rose, from 37% in 2008, to a peak of 41% in 2010,” Smith said.
In the most recent issue of The Cerulli Edge-Advisor Edition, the firm examines the key trends, opportunities and challenges for advisers.
Firms have managed to build trust back to pre-crisis levels, but fewer than half of investors (30%) believe their interests come first at the firm level, according to Smith, who called that number a “disconcerting fact.”
When it comes to the individuals handling their accounts, however, investors were much more positive. Two-thirds of investors responding to the survey indicated that the adviser assigned to their accounts must put client interests first at all times. A significant gap exists between what investors believe about advisers and what they believe about their firms, Smith said.
The research found that most investors expect that their advisers are obligated to put their interests first, but this is not currently the case for most investors. Those investors with investment advisory relationships are assured their advisor is operating under a fiduciary standard and must put client interests first.
“Investors who hold brokerage accounts are assured of a suitability standard of care through their registered representative,” Smith said. “This means that investments offered to the client must be consistent with their best interests, but not necessarily the best option available,” Smith noted.
Deepening client trust is essential for firms that want to maximize the value of their client relationships. Only by truly aligning their business models with investors’ interests and expectations will firms be able to increase their addressable opportunities. Those firms that fully embrace and promote their roles as fiduciary providers are most likely to increase their opportunities among retail investors, Cerulli said.
Other topics in the first-quarter 2013 issue include:
- How broker/dealers can guide advisers through competitive challenges;
- How investors choose new advisers;
- How much advisers are charging for financial planning services; and
- How broker/dealers expect the influence of their due diligence teams to change over the next two years.
More information on The Cerulli Edge-Advisor Edition including subscription information is here.