Document Type
Working Paper
Date of this Version
7-1-2012
Abstract
This paper discusses the market for financial advisers. Because many people are not financially sophisticated, the quality of financial advice is a retirement policy concern. Financial advisers provide a valuable service, and many provide unbiased advice. The United States Department of Labor has estimated that pension participants save billions of dollars a year in financial mistakes avoided due to financial advice. Financial advisers, however, provide many types of services, sometimes have conflicts of interest, and do not always have a fiduciary duty to provide advice in the best interest of the client. Some financial advisers engage in ’hat switching,’ interacting with the same clients as a fiduciary for some transactions, but without fiduciary responsibility for other transactions. Understanding the adviser’s sources of compensation, including third party compensation, will help identify conflicts of interest that may affect the quality of advice clients receive.
Keywords
Financial advice, financial advisers, conflicts of interest, financial disclosure, fiduciary duty, 401(k) participants, IRAs, pension plan sponsors
Working Paper Number
WP2012-06
Copyright/Permission Statement
All findings, interpretations, and conclusions of this paper represent the views of the author and not those of the Wharton School or the Pension Research Council. © 2012 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.
Acknowledgements
The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of any institutions supporting the research with which the authors are affiliated.
Date Posted: 28 June 2019
Comments
The published version of this Working Paper may be found in the 2013 publication: The Market for Retirement Financial Advice.