Being a Fiduciary “Has Something To Do With Money”

In an entirely unscientific study, I talked to 31 people on the street Jimmy Kimmel-style to find out what “the people” think about the term “fiduciary” and the DOL’s fiduciary rule. These conversations happened in the financial district of a major metropolitan area. I made an effort to get a range of demographic profiles, though admittedly I may be overrepresenting people who are willing to be a captive audience while waiting for lunch at a food truck. What I learned was a good reminder of how quickly news travels from the industry to the consumer (hint: not quickly). It also reiterates the opportunity for asset managers to leverage the rule-driven structural changes that are already in place or in process, even if those changes may not ultimately be necessary. Keep reading to find out more and see a brief video of three investors describing what it means to be a fiduciary in their own words.

My colleague, Julia Johnston-Ketterer, recently reported that almost three in four (73%) affluent investors familiar with the DOL’s fiduciary rule state that they would want to work with an advisor that is a fiduciary, and the number familiar with the debate over the ruling had jumped significantly from January to June (27% vs. 36%). There are two accurate ways to look at this increase:

  • Over 1/3 of investors are aware of the ruling, and that has important, unignorable consequences and opportunities for advisors.
  • This also leaves more than 6 in 10 unfamiliar with the ruling.

Few of the people I talked to on the streets were familiar with the ruling, and when I asked them what it means to be a fiduciary they said things like:

  • “It’s about the amount of money you have to pay.”
  • “It means it has to do with money.”
  • “It means do the right thing.”
  • “I have heard the term but have no idea what it means.”
  • “It’s part of a will.”
  • “Someone who is financially responsible, I think.”
  • “Someone who makes financial decisions on your behalf.”
  • “A fiduciary is someone who has responsibility over your investments.”

A few got it right or close, such as:

  • “It means a legal responsibility to put your interest first.”
  • “[It’s a] responsibility to work in the best interest of your client.”
  • “Be ethical when recommending something. Don’t do it for your benefit.”

Here’s a brief video of three of the more informed and willing advised investors describing what it means to be a fiduciary.

Outside of these three, there was little difference in definition precision among those working with advisors, and the visible lack of confidence when talking about this topic was nearly universal. Alarmingly, a few claim to work in the financial services industry and still didn’t nail the definition. One held a securities license until last year and defined a fiduciary as “someone who has responsibility to manage your money.”

If the DOL fiduciary rule were a marketing campaign, the “heavy up” is over. Any investor education that came amid the news flurry likely isn’t climbing much higher than it is today. We are now facing the delay of the second phase implementation and the slow dismantling of portions of the rule. We’ve seen this story before, and the version of the rule that sticks long-term will be a whisper instead of a growl. It’s certainly unlikely to push investor knowledge beyond where it is today. Online articles describe fiduciary duty as being “in retreat” and list some critical questions for investors to ask since the burden of finding someone who will act in your best interest is on you.

However, many of the rule-driven structural changes are already in place or in process. Initially, these changes happened (indirectly) by force, but moving forward there will be more choice: quietly unravel previous efforts or forget the initial reluctance and capitalize on the opportunity. Companies that follow through and message to advisors and to investors about their commitment to acting in investors’ best interests will gain a brand edge. As Julia noted in her June post, “advisors stand to gain from the rule as well, because 27% of affluent investors who were made aware of the rule have said their perception of their advisor has improved.” Asset managers can pursue a similar perception improvement for themselves, with or without the rule. They just need to remember to do so loudly and clearly, without assuming that their long journey to this point has been shared by investors.

Three Takeaways:

  1. Don’t forget that for every one investor who knows about the rule and what it means to be a fiduciary, there are many who do not.
  2. There will be a temptation to pull back on rule-driven changes as the rule itself is delayed and altered. Asset managers who stay the course can differentiate themselves and create opportunities for brand-building with the proper brand research behind them.
  3. Lack of investor knowledge means those opportunities must be pursued loudly and without assumptions when marketing in the financial services industry.

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This entry was posted in Brand and Messaging, Financial Services by Lindsey Dickman. Bookmark the permalink.
Lindsey Dickman

About Lindsey Dickman

Lindsey Dickman is a vice president in the Financial Services division of Market Strategies and has been partnering with clients to develop products, services and brands through both qualitative and quantitative engagements for almost 10 years. As a RIVA-trained moderator, Lindsey has conducted hundreds of focus groups, one-on-one interviews and online groups/interviews among consumers, financial advisors and institutional investors throughout the world. Her quantitative experience includes management and analysis of more than 10,000 daily global online and telephone surveys, spanning brand tracking, customer experience, ad/message testing and product optimization. She graduated with high honors from Emory University with a bachelor’s degree in economics and Spanish. Lindsey is trying to perfect her tennis drop shot and enjoys going for walks—or, more precisely, smells—with her beagle, George.

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