Trust in Advisors is Stuck at 2009 Levels

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The first of two articles on the state of investor trust.

“Fiduciary September” was invented by the Institute for the Fiduciary Standard to remind investors and the planning profession why fiduciary advice matters.

The investment advisor’s fiduciary duties derive from the Supreme Court (SEC v. Capital Gains Research Bureau, Inc. :: 375 U.S. 180 (1963) :: Justia US Supreme Court Center). Being a fiduciary means an advisor must fulfill the duties of loyalty, care and utmost good faith. From the Latin, fiducia means trust. Investor trust in finance and financial advisors is a pillar of the capital markets.

But it is transforming in front of us.

After the 2008-2009 financial crisis, restoring investor trust was the topic de jure. The Wall Street Journal’s Jason Zweig wrote in 2010 the crisis “shattered faith in the financial system itself” among investors.

Zweig’s prescription to restore investor faith? Admit mistakes and apologize. Have “more perp walks of Wall Street executives … because investors want the comfort that the bad guys are hurting.”

None of Zweig’s recommendations were taken seriously. Too many investors remain without faith.

In May, Financial Planning magazine reported on a survey from Morning Consult: “Advisors have a serious trust problem”. It stated that this “creates a challenge for advisors and wealth managers who have long made trustworthiness a pillar of their brands ….”