We didn’t need a survey to tell us that NAIFA members provide important and valuable services for America’s Main Street investors. Our members aren’t shy when it comes to explaining how they are small business owners in communities across the USA and how they are dedicated to helping their friends and neighbors attain financial security. They tell us how they often make a difference in the lives of people who aren’t super rich, and how developing relationships (which often last for decades) and maintaining clients’ trust are vital to their business success.
But with an influential group of policymakers, regulators, and financial columnists calling for new regulations that could hamper the ability of financial advisors to serve Main Street investors, having a little raw data can’t hurt.
That’s why NAIFA commissioned LIMRA International to conduct a survey of our members and another of consumers to explore the public’s investment attitudes and their relationships with financial professionals. The studies also take a close look at how requiring registered reps and broker-dealers to operate under a fiduciary standard, which the SEC is now studying, might affect the ability of middle-market investors to obtain financial products and services.
The survey results confirm that NAIFA members provide affordable financial services to lower- and middle-market consumers, with members saying 58 percent of their clients have household incomes of $99,000 or less and 77 percent earn $149,000 or less. If a fiduciary standard of care is imposed, many NAIFA members believe their compliance costs would increase, and if costs go up 15 percent, 65 percent of NAIFA members would be forced to take action that would limit access to financial advice for this middle market (by increasing fees, serving only affluent clients, or not selling securities). Close to half (41 percent) of members say that “few” or “very few” of their clients could pay the added costs.
The survey also reveals that consumers likely wouldn’t receive any benefit from an imposed fiduciary duty, because most NAIFA members would not change their day-to-day treatment of clients. They do the best job they can for their clients now. Besides, NAIFA members are already highly regulated. Our survey results show that they and their staffs spend an average of nearly $9,000 and 514 work hours annually to clear existing regulatory hurdles.
In the end, though, it all comes back to trust — if NAIFA members can’t earn it from their Main Street clients, they won’t stay in business long. No government regulations, existing or new, will provide consumers with any greater protection.