Investors have more confidence in professionals using an “adviser” label
Investors have more confidence in professionals using an “adviser” label

Investors have more confidence in professionals using an “adviser” label

Do you think that an individual´s professional title affects their first impression? If so, it seems that many others have the same frame of mind.

A new study suggests that a vast majority of people tend to make snap judgements on people based on their job title, specifically those within the finance industry.

The survey from Mercatus Center at George Mason University showed that respondents had a higher expectation in regards to the level of service they would receive from employees with titles such as financial planner, financial adviser and investment adviser.

Consumers tend to put more stock in investment professionals who use the above terms rather than those who express themselves as working in a sales environment. Those working as advisers were placed in the same category as doctors and lawyers.

On the opposite end of the spectrum, people who label themselves as stockbrokers, investment salespeople and life insurance agents were ranked with politicians and car salespeople.

The study involved 1,816 American adults from the RAND American Life Panel – a nationally representative panel of 6,000+ participants who are regularly interviewed over the internet. 54 per cent of these individuals reported that they had previously worked with an adviser, however, only 6 per cent had experience with a broker.

“On competency, there’s not a big difference,” said the author of the study, Derek Tharp, an assistant professor of finance at the University of Southern Maine. “It’s the loyalty component” that creates the separation between advice and sales.

For years, there has been controversy surrounding the use of the term “financial adviser” by brokers or other investment professionals who aren´t exactly what they claim to be.

Advisers are trustees for their clients meaning they put the customers’ needs before their own. Advisers can´t buy securities for themselves before buying them for clients, and they are prohibited from making trades that may result in higher commissions for themselves or their investment firms.

Brokers work for broker-dealers. They follow a suitability standard, which only means that transactions must be suitable for clients’ needs. A key distinction in terms of loyalty here is important, as brokers serve the broker-dealers they work for and not necessarily their clients.

The Securities and Exchange Commission approved a regulatory package in June to raise investment advice standards, however, it did not include a formal title reform proposal.

Titles and their definitions are only touched upon in the Form CRS, a disclosure document designed to outline the differences between advisers and brokers.

Close Menu