While some organizations continue to promote “disclosure” over an actual requirement to be a fiduciary – 403(b) (and 401(k)) participants have made it clear – they want investment advice to be in their best interest.
A recent AARP survey, titled “Fiduciary Duty & Investment Advice: Attitudes of 401(k) and 403(b) Participants” could not have been more clear in its results. According to AARP, “The survey was administered online from May 24, 2013, to May 31, 2013, by GfK Custom Research to its national KnowledgePanel, a probability-based web panel designed to be representative of the U.S. population. The findings are based on 1,425 adults ages 25+ who currently have money saved in a 401(k) or 403(b) plan.”
A few key findings (taken directly from the AARP site linked to above):
More than nine in ten (93%) respondents indicate that they would favor requiring plan providers to give advice that is in the best interest of plan participants. Nearly as many (89%) favor requiring plan providers to explain, prior to giving advice, if the advice is not required to be in the best interest of plan participants.
More than three in four (77%) respondents indicate that they are concerned by the fact that investment advice from plan providers is not required to be in the best interest of individual plan participants. Fewer—yet still a majority (62%)—describe themselves as concerned by the fact that their plan provider can give advice to plan participants while making money from their investment selections.
Before reading a statement explaining that investment advice from plan providers is not required to be in the best interest of individual plan participants, just over nine in ten (93%) plan participants indicated that they either “completely” or “somewhat” trust their plan provider to manage their 401(k) or 403(b) investments in their best interest, while nearly as many (87%) respondents said that they trust their plan provider to give them investment advice that is in their best interest.
After reading that advice from plan providers is not required to be in the best interest of plan participants, half (50%) of respondents indicate that this information makes them “less likely” to trust their 401(k) or 403(b) provider for advice while just over one in three (37%) indicated that it has “no impact” on their level of trust.
When asked to indicate whether they would prefer to receive advice about their 401(k) or 403(b) plan from someone that may make money from their investments or no investment advice at all, reactions are mixed. Almost four in ten (39%) said that they would choose “advice from someone that may make money from the investments I choose,” but nearly as many (31%) indicated that they would choose “no investment advice at all.” Another three in ten (29%) indicated that they “don’t know” which they would choose.
Approximately eight in ten (81%) respondents agree that it is important to get investment advice about their retirement from an independent advisor who does not earn money based on their investments.
Fewer than four in ten (36%) respondents would trust the advice from an advisor who is not required by law to provide advice that is in their best interest.
While this is no surprise to me, it provides further support that Associations working to undermine fiduciary based advice in 403(b) plans are pursuing a goal that is clearly divergent from the participant base they seek as clients.
The Executive Summary is below: