Investors Clueless on Suitability vs. Fiduciary Standards

WASHINGTON -  FEBRUARY 25:  Chief Financial Of...
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Ultimately those held to the suitability standard report to the financial institution they work for. Under the fiduciary standard the adviser reports to the client.

At issue, of course, is the question of a suitability standard (under which an advisor is required to make investments he judges to be suitable for his clients) vs. a fiduciary standard (under which an advisor is required to act in his clients’ best interests, and disclose to them all conflicts of interest). The J.D. Power and Associates2011 U.S. Full Service Investor Satisfaction Study, released Thursday, shows that 85% of full-service investors either have not heard of the difference between the two or do not understand what the difference is.There is, however, a difference in satisfaction levels between them. Among the full-service clients who have a fiduciary relationship with their advisors, 57% say that increases their comfort level; 42% say it actually reduces their comfort level.

via advisorone.com

Eventually investors will realize that their advisers may not have their best interest in mind when recommending financial products. Many already do realize it and this is why there is a lack of trust in financial institutions.

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