CLS Investments, LLC (“CLS”), a third party money manager and a leading manager of exchange traded fund (“ETF”) portfolios, recently joined with MarketCounsel, a leading business and regulatory compliance consulting firm to the country’s preeminent entrepreneurial investment advisors, to survey over 200 independent financial advisors about the fiduciary standard of care. The objective of the survey was to gauge advisor perception with regard to the term “fiduciary” — how advisors understand the term, whether they deem it worthwhile to use the term in describing themselves with clients, and whether it should be uniformly applied across the financial advisory industry’s many channels.
Perhaps the most striking finding of the survey was the general lack of regard that advisors have for the current usage of the term “fiduciary.” Generally, respondents said working solely in their clients’ best interest is more important than promoting that they are held to the fiduciary standard — nearly 70% said being a fiduciary is not determined by how you are compensated, or how the standard of care is disclosed. Supporting this conclusion, 75% of overall respondents say acting solely in a client’s best interest defines a fiduciary. Further, 37% of respondents deemed the term “meaningless,” due to a lack of understanding of its function, and 39% felt that regulatory language, definitions, and standards are not clearly defined.
“While a clear definition around the term is needed to move forward, the core of the issue is larger than the industry’s lack of regulatory clarity around the term fiduciary — the real issue is that the retail customer doesn’t understand what that term really means,” said Todd Clarke, CEO of CLS Investments. “Until we can help the lay investor understand what it really means to be served by a fiduciary and why they should work with one, I think we will continue to see these inconsistencies and feedback industry-wide. Without demand from the investor, we will maintain the status quo.”