Rollovers Need Strict ERISA Standards

A majority of advisers surveyed (79%) said the strictest fiduciary standard should apply to rollovers of retirement accounts.

A survey by fi360 and measured the attitudes of financial intermediaries toward the fiduciary standard and how they apply fiduciary principles – or not – in practice. The survey was conducted as the Department of Labor (DOL) prepares to propose new fiduciary rules that could draw a wider range of financial advisers under the ERISA fiduciary standard when they advise retirement investors.

Current rules allow some advisers to remain exempt from the ERISA fiduciary standard under certain conditions. Some financial services companies are fighting hard to prevent proposal of the rules, which would require brokers to put investors’ interests first.

“This support for the fiduciary standard for retirement investors, coming from registered reps and investment advisers across the spectrum of business models is very compelling,” said Blaine Aikin, president of fi360. “Once again, the majority of professionals understand that putting the best interests of their clients first is in their long-term best interests as well and has become a competitive necessity.”

In other survey results, advisers largely rejected the arguments of opponents of placing investors’ interests first by extending the fiduciary standard for advice. Opponents have argued that the fiduciary standard would increase investors’ costs and limit their access to advice and products. But survey respondents said extending to fiduciary standard to brokers would not cost investors more for advice (79%); price investors out of the market for advice (69%); or limit access to advice or products (68%).

Survey participants strongly agreed that investors are unaware of the differences between the fiduciary standard governing investment advisers and the much lower “suitability” standard used by the brokers.


Confusion Over Titles

Most of those surveyed (97%) said that investors don’t understand the differences between brokers and investment advisers. About three quarters of respondents (72%) said the titles “adviser,” “consultant” and “planner” imply the existence of a fiduciary relationship. A majority of respondents (82%) said disclosures alone are not sufficient to manage conflicts of interest.

On the retirement issue, advisers said the ERISA fiduciary standard that applies to advice to retirement investors in 401(k) accounts should also apply to IRAs and rollovers from 401(k) and IRA accounts.

Most of those surveyed (79%) agreed that ERISA fiduciary duty should cover advice on rollovers out of 401(k)s and IRAs; 72% said the ERISA fiduciary duty that applies to 401(k)s should also apply to advice on IRAs; and 61% agrees that the DOL should expand the number of advisers who are considered fiduciaries

“Though regulators may still be considering whether and how to impose a fiduciary standard on advice givers, many advisers are already putting their client’s interests first, whether or not they have a legal obligation to do so,” said Jamie Green, group editorial director for Summit Business Media’s ThinkAdvisor.

The survey also showed that compensation models make a material difference in how intermediaries interact with investors. Commission-only and commission/fee participants lean away from the fiduciary standard, while fee-only and fee-based participants lean toward the fiduciary standard. Most commission-only and fee/commission (more commissions than fees) participants would rather be fee based (more fees than commissions) or fee-only.

The 2013 fi360-ThinkAdvisor Fiduciary Survey was conducted by fi360, the organization that provides fiduciary education, investment analytics, support services and industry insights for financial professionals, in partnership with, the online news and analysis site for all advisers. This is the third year that fi360 and ThinkAdvisor (formerly AdvisorOne), have collaborated on the survey.

More than 380 advisers from a broad set of business models, registration types and compensation schemes provided their views. Participants included registered investment advisers, investment adviser reps (RIA/IARs); broker/dealer registered reps; dual registrants – who are both RIA/IARs and broker/dealer registered reps; and insurance consultants and insurance producers. Their clients include individual and retirement investors.

The 2013 fi360-ThinkAdvisor Fiduciary Survey is available here.