In July, investors saw the roll out of the final phase of CRM2, a new set of rules intended to bring greater transparency to investors on how much their advisors are taking and making off their client’s wealth. This means advisors are under greater pressure than ever to justify their fees to clients.
The changes come at a pretty good time: A new J.D. Power survey finds that just 27% of investors say they have complete understanding of their fees. That’s down from 30% in 2012. The survey was conducted in May and June, before the final rollout of CRM2, so we’ll have to wait to see if fee comprehension increases.
While 54% of investors indicated that their advisors helped them set goals and discussed risk, only 34% felt they were actually effective in implementing strategies to meet goals and monitoring progress. Ouch.
“These results don’t speak well for the industry as a whole,” said Mike Foy, director of wealth management practice at J.D. Power, in a press release. “Advisors who aren’t adding value for their clients beyond asset allocation may be in real trouble.”
The survey also marks the growing popularity of robo-advisors: Nearly one-third of those surveyed say they’d be interested if their firm offered them one, a figure that—to nobody’s surprise—rises to 45% among millennials.