The results from the Cerulli Associates survey about investors’ preferences for paying a fee vs. commission for financial advice come as no surprise to NAIFA members.
As reported in Investment News, nearly half of the 7,800 households surveyed said they preferred paying commissions for financial advice, compared with just 27 percent who said they would rather pay a fee based on assets. These results are in line with a 2010 LIMRA survey commissioned by NAIFA that asked consumers what they would do if their advisor charged $2,500 upfront for planning: 71 percent said they would seek another advisor or go without professional services all together.
This preference for a commission-based structure may not bode well with the industry trend toward fee-based models (according to the Cerulli survey, 66 percent of advisors were paid by fees in 2010, compared with just 46 percent in 2003.)
NAIFA members are part of the group of advisors who follow the commission-based model. NAIFA President Terry Headley says NAIFA members clients’ – the majority of whom earn less than $99,000 a year – simply can’t afford the thousands of dollars of upfront fees that many investment advisors charge to their wealthier clients.
With the SEC examining how a uniform fiduciary standard of care would work to protect the investing public, NAIFA has stated its concerns that a ‘one-size-fits all’ fiduciary standard will force many consumers into a fee-based model and deprive them of any real choice over how they access financial services.
The Cerulli and LIMRA studies clearly show that consumers seeking financial advice prefer to have a choice. Now is not the time to implement a standard of care that will in the end disenfranchise the middle market by limiting their freedom of choice and access to advice, products, and services that will help protect their financial security.