FALLS CHURCH, VA (July 2, 2013) – A new survey of financial professionals by the National Association of Insurance and Financial Advisors (NAIFA) and The American College of Financial Services shows a large majority is concerned that a Securities and Exchange Commission (SEC) rule requiring them to have a legal fiduciary obligation to their clients would increase their costs and harm the ability of middle-market investors to obtain financial services and advice.
NAIFA and The American College conducted the survey of Association members and College alumni to obtain data requested by the SEC as it conducts a cost-benefit analysis to determine whether a uniform fiduciary rule for all financial professionals is warranted, and if so what it should entail. NAIFA filed comments with the SEC today, which included responses to the SEC’s alternative approaches to the uniform fiduciary standard.
According to the survey, 84 percent of the advisors said they believe an SEC uniform fiduciary standard would increase their cost of doing business. At least some of this cost increase would have to be passed along to consumers, said 77 percent of respondents.
Nearly half of the advisors (48 percent) said they would need to impose higher minimum account balances on clients if their costs increased by 15 percent. Additionally, 44 percent said they would impose or increase fees on clients, while 18 percent said they would implement a fee-only business model and 10 percent said they would stop selling securities products.
“NAIFA is uniquely positioned to provide information the SEC can use to determine how a uniform fiduciary standard might affect middle-market investors,” said NAIFA CEO Dr. Susan Waters. “NAIFA members work in communities across the country, forming relationships with families and small businesses. These clients very often have less than $250,000, $100,000 or even $50,000 worth of investments, yet they are in dire need of affordable financial services and advice.”
Other key findings of the NAIFA-American College survey include:
- 90 percent of registered representatives are compensated by commissions on product sales, while 68 percent of dually registered advisors, who are licensed both as registered representatives and investment advisers, receive a combination of fees and commissions. Previous surveys have found that many low-to-mid-market investors prefer to pay for services via commissions.
- Registered representatives most commonly sell or recommend mutual funds (89 percent of respondents), variable annuities (83 percent), 529 college plans (63 percent) and variable life insurance (62 percent). Consumers who purchase these products through registered representatives would be most impacted by an SEC fiduciary rule.
- 91 percent of registered representatives serve investment clients with an average household income of less than $250,000; 47 percent serve investment clients with household incomes of less than $100,000. For dually registered advisors, 86 percent serve investment clients with an average household income under $250,000, and 30 percent serve those with an average household income under $100,000.
- 53 percent of registered representatives and 32 percent of dually registered advisors say the majority of their securities clients have portfolios of $100,000 or less. Some 83 percent of registered reps and 63 percent of dually registered advisors say the majority of their securities clients have portfolios of $250,000 or less.
Results from the 2013 survey of NAIFA members and results from a 2010 survey by LIMRA International are incorporated into NAIFA’s comments to the SEC. The letter provides data and evidence of ways that a uniform fiduciary duty could impact middle-market investors. It outlines rules already in place to protect clients of registered representatives and dually-registered advisors.
“NAIFA members are among the most highly regulated financial professionals on the planet,” said NAIFA CEO Waters. “They build life-long relationships with many clients and rely on clients for repeat business and referrals. Their motivation to look out for the best interests of their clients goes well beyond any regulatory obligation.”
In its comment letter, NAIFA urges the SEC “to opt against taking any action that would attempt to cure a problem that has not been demonstrated to exist.” Should the SEC find a need to propose a fiduciary rule, NAIFA encourages the SEC to make certain that the regulation does not have the unintended effect of reducing the access of mid- and lower-market investors to needed financial products, services and advice.
About the SurveyNAIFA and The American College conducted a Web-based survey of active NAIFA members and American College alumni May 20-29, 2013. Results are based on responses from 2,419 NAIFA members and American College alumni who said they currently sell or recommend securities to clients.
For additional information, see: