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Use of advice leads to stronger trust in the industry
While many industry insiders feared the worst, financial advisors actually fared very well over the past year—a year filled with threats of the Department of Labor (DOL) fiduciary rule casting doubt on the industry overall as well as creating intense scrutiny on fees. In research earlier this year, we observed financial advisors were feeling positive about the intention of the fiduciary rule but also concerned about the implementation potentially damaging their reputation among investors. Remarkably, quite the opposite occurred.
While many advisory firms moved forward with changes in how advisors provide financial planning and communicate guidance, especially with respect to IRAs, only about one-third of affluent American investors became aware of the fiduciary rule. Among those familiar with the rule, most reported their impression of advisors was unchanged and an additional 27% cited that their perception of advisors had actually improved, evidence that preparation efforts toward compliance with the rule were not in vain, even amid the extensions and delays recently announced with fiduciary rule efforts.
Perhaps most telling is the level of trust in the investment community among affluent investors working with financial advisors, as it is significantly higher compared with prior years. In fact, more affluent investors have turned to a financial advisor in 2017 as a trusted source of investment.
Kudos to the financial advisors who built strong client relationships based on trust and, as a result, were able to weather the regulatory storm and uncertainty that blew in with it. Trust among traditionally advised investors is stronger than ever as advisors have created a place for investors to turn for answers about investors’ financial needs. Now it is up to financial advisors and advisory firms to continue to grow their businesses by building trust among prospects who have shunned any meaningful doubt in the financial investment community.