In light of recent rumblings about the fiduciary rule going into effect in June, Personal Capital, a digital wealth management firm, has discovered that a large number of Americans are unaware that financial advisors are not always working in their best interest and require greater information on how to work with advisors to grow their wealth.
According to Personal Capital’s recent survey of over 2,000 U.S. adults, the wealth management firm found that 46% of Americans mistakenly believe all financial advisors are required by law to always act in their clients’ best interest or abide by fiduciary standards and 31% of respondents were unsure.
There is also increased skepticism regarding financial advise, with 70% of Americans saying that recent events in the financial industry have made them question the trustworthiness of financial professionals. Around 32% believe that financial advisors are likely to take advantage of a consumer.
About 54% of surveyed respondents do not utilize advice from financial advisors. Of those respondents, 45% say they aren’t working with an advisor due to a lack of trust.
When it comes to the cost of investments, 21% of American investors who have at least one investment account know they pay investment fees but do not know the amount paid.
“Too many traditional players in this industry are prioritizing their products, commissions and fees before the client’s best interests, and that is putting consumers’ hard-earned savings and retirement security at risk,” Personal Capital CEO Jay Shah said in a note. “Typically, this is not the customer’s fault, as many advisory firms bury fees in fine print and jargon that is difficult to understand. We encourage all firms to meet a higher standard when it comes to offering objective, personalized financial advice in a more transparent manner, so that we can empower Americans to better manage their financial lives.”
Many inaccurately believe that higher fees translate to higher returns, with 32% of Americans believing higher fees for investment accounts will generally generate higher returns, despite studies showing otherwise. Around 28% of American investors don’t look at fees all together.
“Americans count on financial advisors to help them manage their money and achieve their goals, whether that’s sending their kids to college or achieving a comfortable retirement,” Personal Capital Founder and Chairman Bill Harris said in a note. “Achieving these critical life goals is a roll of the dice if the advisor is not a fiduciary. The financial wellbeing and best interest of the customer should be the top priority, and a legal obligation, for any firm managing consumers’ money.”
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