Advisor Trends

What Do Retirement Investors Expect From Financial Advisors?

Americans want retirement investment advice to be in their best interest

A new survey from CFP Board reveals 9 in 10 Americans assume financial professionals are required to act in their best interests when recommending moving workplace retirement savings into an IRA or annuity. View the complete report here.

WASHINGTON, March 11, 2024 /PRNewswire/ — A new survey commissioned by CFP Board reveals that nearly 97% of Americans agree that the financial professional who provides one-time recommendations or other one-time advice about retirement investments should be required to act in their client’s best interest. This includes a recommendation to roll over funds from a workplace retirement savings program (such as, for example, a 401(k) plan) into an IRA or an annuity.

This finding comes in support of the U.S. Department of Labor’s (DOL’s) proposed “Retirement Security Rule: Definition of an Investment Advice Fiduciary,” an expansion of the fiduciary standard set under the Employee Retirement Income Security Act (ERISA). This rule applies to advice provided to investors by financial professionals regarding their retirement assets, including rollover recommendations.

According to the survey, which polled Americans who have worked with a financial professional, this proposed rule change mirrors the assumptions that Americans make about the advice they already are receiving. Nearly all Americans (92%) understood that the financial professional who recommended moving their funds out of a workplace retirement savings program into an IRA or annuity was required to make that recommendation in their best interest. Americans widely believe that a financial professional giving such advice is doing so as a fiduciary. Only 5% of survey respondents did not expect the financial professional to fulfill a fiduciary role regarding advice on rolling over workplace retirement savings into an IRA or annuity.

“Workers and retirees seek a financially secure and dignified retirement and deserve to have financial professionals delivering retirement investment advice in their best interests,” said CFP Board CEO Kevin R. Keller, CAE. “The Department of Labor’s proposed Retirement Security Rule helps assure clients that they can trust their advisor to help them achieve their investment and retirement goals confidently and ethically. This new rule would close existing regulatory gaps from antiquated regulations that were created in 1975.”

CFP® Professionals Thrive Following Fiduciary Standard Requirement

A separate survey of CFP® professionals demonstrates that broadening the fiduciary standard requirement across the financial planning ecosystem will not limit the flexibility of financial planning services, nor will it reduce access to these services for moderate-income investors. Among other things, the survey conducted by the CFP Board Research Team asked about the minimum amount of investable assets that a client must have for the CFP® professional to provide them with financial advice about those assets (the financial advice may concern any kind of product, service or account type).

After CFP Board expanded the scope of the fiduciary duty in CFP Board’s Code of Ethics and Standards of Conduct (which was effective for all purposes in 2020), 90% of CFP® professionals chose to maintain their current required minimum investable assets for clients rather than raising the minimum, according to the study.

Similarly, the vast majority of CFP® professionals (82%) did not raise the minimum investable assets threshold for their clients following the U.S. Securities and Exchange Commission’s (SEC’s) adoption of Regulation Best Interest (Reg BI), which established a “best interest” standard of conduct for securities-related investment advice and went into effect in 2020. Now, nearly four years after Reg BI’s adoption, 42% of CFP® professionals surveyed do not require their clients to have a minimum amount of investable assets. What’s more, Reg BI had a limited impact on CFP® professionals’ client rosters — 86% of CFP® professionals maintained their existing client roster after the regulation’s enactment.

Workers and retirees seek a financially secure and dignified retirement and deserve to have financial professionals delivering retirement investment advice in their best interests...

The survey data demonstrate the continued dedication with which CFP® professionals serve clients from various financial backgrounds, especially those in moderate-income households. More than half of CFP® professionals (52%) provide financial advice to clients with a household income of $0 to $75,000, and two-thirds (67%) provide financial advice to clients with a household income between $75,001 and $150,000.

“Moderate-income Americans saving for retirement should receive the same access to best interest financial advice as wealthy Americans,” said CFP Board General Counsel Leo G. Rydzewski, J.D., CAE. “The DOL’s proposed Retirement Security Rule is needed to fill the gaps that Regulation Best Interest and the NAIC Model Regulation don’t cover. It is an important step toward improving retirement security for all Americans. If the rule is adopted, moderate-income savers will gain – rather than lose – access to retirement investment advice that is in their best interests.”

CFP Board’s research demonstrates that DOL’s proposed Retirement Security Rule will fill the regulatory gap by applying a consistent and strong standard for retirement savings. If adopted, the new rule will prevent advisors from avoiding fiduciary responsibility even when they are functioning as, and clients are relying on them as, trusted advisors.

 

 

 

Methodology
CFP Board engaged with the Center for Economic and Social Research at the University of Southern California (USC) to survey select members of its Understanding America Study (UAS) internet survey panel. The UAS is a nationally representative probability-based internet panel of U.S. households including over 14,000 respondents. Panel members are recruited into the UAS through priority mail using a sampling algorithm applied to a random selection of U.S. Postal Service delivery files. Once respondents consent to become panel members, they are invited to complete at least one survey per month on a computer, tablet or smartphone. Participants are provided with broadband internet access and a tablet if they do not have an existing connection. Panel members typically receive $20 for every 30 minutes of survey time.
Between February 1 and 13, 2024, the USC Center researchers surveyed panel members who had reported working with a financial professional. The survey generated 783 responses, of which 736 had worked (or are working) with a financial professional. The 736 screened responses give a margin of error at the 95% level of confidence of +/- 3.6%. Data presented in this report reflect weights applied by USC researchers to represent the gender, race/ethnicity, age, education and geographic location distributions of Americans who have ever worked with a financial professional.
On February 20, 2024, CFP Board’s Research team sent a 14-question survey to randomly selected CFP® professionals certified on or before May 1, 2020, nationwide. The survey contained 14 questions and generated 412 responses when it closed on March 1, 2024. The data collected from the survey, which serves as the basis of this report, is subject to a sampling error of +/- 4.8% at the 95% confidence interval.
About CFP Board
CFP Board is the professional body for personal financial planners in the U.S. CFP Board consists of two affiliated organizations focused on advancing the financial planning profession for the public’s benefit. CFP Board of Standards sets and upholds standards for financial planning and administers the prestigious CERTIFIED FINANCIAL ™PLANNER certification — widely recognized by the public, advisors and firms as the standard for financial planners — so that the public has access to the benefits of competent and ethical financial planning. CFP® certification is held by nearly 100,000 people in the U.S. CFP Board Center for Financial Planning addresses diversity and workforce development challenges and conducts and publishes research that adds to the financial planning profession’s body of knowledge.

 

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