AARP Study Highlights Need for Investment Advice Education

As Phyllis Borzi was informing the attendees of the Financial Services Institute’s annual conference this week that the Department of Labor’s forthcoming fiduciary standard proposal will be delayed, AARP released a study of the attitudes of 401(k) and 403(b) participants regarding fiduciary duties and investment advice.
 
In releasing the study, AARP highlighted the finding that 93% of respondents trusted their providers before being told that advisors are “not required to act in their best interests” (AARP’s assertion) — after which half of respondents promptly claimed to be “less likely” to trust them. While the study’s main point is that participants want providers to act in their best interests, AARP’s data also shows that 62% of those polled were either more likely to trust their provider or have their present trust level unchanged by the knowledge that their provider may benefit financially from participant investment selections. Respondents understand that there is mutual value in tying performance to compensation.
 
Something else the study quietly highlights: Our industry must continue to educate the public about the value of investment advice.
 
Participants don’t yet understand — nor does the study substantively address — the qualitative benefit of seeking investment advice. A recent Principal study found that 92% of participants who attend one-on-one meetings with plan advisors agree to take a positive action, like saving more. Additionally, participants who use an advisor save 25% more annually than those who do not, according to ING. Clearly these professionals serve an important informational role.
 
ASPPA and NAPA have consistently favored disclosure versus adopting confusing fiduciary rules. We believe providing clear and concise pre-engagement disclosures designed to assist working Americans in the selection of investment advice will reveal conflicts of interest while giving them greater power over their own retirement planning efforts.
 
Ray Harmon, Esq. is ASPPA’s Government Affairs Counsel.