Investors would still be in the dark when it comes to knowing what fees their financial adviser would charge them and what potential conflicts of interests would mean for their portfolios if they rely solely on the basic elements of a proposed government disclosure form, according to new research from AARP.
The Securities and Exchange Commission (SEC) created several proposed forms — called a customer relationship summary, or CRS — to help everyday investors understand if their interests come before their financial services professional’s desire for bigger profits.
Since May, the SEC has been gathering comments from financial professionals and consumer advocacy organizations about the proposed forms. AARP and the Certified Financial Planner Board of Standards, an organization of financial professionals, conducted their own consumer testing of the proposed SEC forms.
AARP and partners commissioned two studies. The first found that the proposed SEC form was confusing. The second, which tested a modified version of the form, concluded that consumers still wouldn’t be fully informed.
For the second series of tests, researchers conducted a total of 18 one-on-one, hour-long interviews of consumers in Denver, Tulsa, Okla., and St. Louis. The participants were shown alternative designs of the form that would be used by firms registered to offer services as both broker-dealers and investment advisers. Investment advisers primarily counsel consumers on overall financial strategy and portfolio management, while broker-dealers mostly focus on making financial transactions. Some firms offer both types of services.
A report on the latest testing, which AARP plans to submit to the SEC today, found that: