Investors, whether they be high net worth individuals or the, average retirement investor, tend to have a lot of misconceptions about financial advice.
Digital advisor Personal Capital conducted research that suggested one of the greatest concerns that investors have is whether their best interests are top of mind.
Of the investors surveyed, 48% believed that all financial advisors are required by law to act in the client’s best interest. Of those who actually worked with an advisor, 65% believe that financial advisors do recommend only what is in the client’s best interest. This is an improvement over the 46% who believed the same in 2017.
The trouble is, neither belief is correct. One problem is that the definition of ‘best interest’ can add to the confusion. Many investors are unsure whether their advisor is a broker-dealer or a fiduciary, and that makes all the difference in receiving unbiased investment advice. A fiduciary is mandated by law to serve the client’s best interests, while broker-dealers are held to a less stringent suitability standard.
Personal Capital’s survey also revealed that investors are more loyal to their advisor than the firm the advisor is with. Of those surveyed, 71% said that they would follow their advisor if he or she moved to another firm. Millennial investors are particularly loyal, with 80% saying they would stick with their advisor in the case of a move.
Many investors are also pretty much in the dark when it comes to fees. Surprisingly, only 44% knew what they were paying in fees on their accounts. Twenty percent had no idea how their advisor is compensated.
This is yet another reminder of the importance of initiating conversations about fees and compensation. Every client should understand what he or she is paying for and have the privilege of working with an advisor who puts the client first.
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Many Investors Are Confused About Financial Advice: Personal Capital | ThinkAdvisor