Half of Americans Believe All Advisers Must Act in Their Best Interest

Many do not know if their adviser is technically a broker/dealer or an adviser, Personal Capital learned in a survey.

Nearly half, 48%, of Americans incorrectly believe that all financial advisers have a legal obligation to act in clients’ best interests, Personal Capital learned in a survey, which it summarized in a report, “How Many Americans Are Still in the Dark About Their Financial Advice?”

In addition, 65% of investors who work with a financial adviser mistakenly believe the adviser can only make recommendations that are in a client’s best interest, up from 46% in 2017. In addition, 18% were unable to differentiate whether their adviser is a broker/dealer or fiduciary.

Although 30% think advisers are likely to take advantage of clients, nearly all (97%) believe their adviser is trustworthy.

Only 44% of Americans know the amount of fees they pay on all their investment accounts, and 20% do not know how their adviser is compensated. Personal Capital says that fees can add up to more than $400,000 in an investor’s lifetime.

Asked who they would trust their money to, 28% said a registered investment adviser, 21% said a big bank/brokerage firm, 14% said a local advisory company, 8% said an online platform, and 33% said none of the above.

Asked whether they would follow their adviser if they joined a new firm, 80% of Millennials said yes, but this is true for only 70% of Gen Xers and 66% of Boomers.

Asked about the adoption of technology by financial services companies, 74% said it makes it more convenient to view their portfolio, 69% said it makes it easier to use and 44% said it helps them understand personal finances. However, 69% said they are concerned about cybersecurity, 46% prefer traditional financial interactions, and 36% have privacy concerns.

Personal Capital’s findings are based on a survey that Engine conducted among 2,007 adults last December.  The report can be viewed here.