AndreaCoombes

Americans say it’s tough to find trusted financial advice

If you’re worried and uncertain about how to find financial advice you can trust, you’re not alone. Almost half of Americans said it’s hard to know which sources of advice to trust, according to a new survey.

Lack of trust is not the only problem: 40% of those surveyed said good financial advice costs more than they can afford, according to the survey of 1,000 Americans aged 18 or older by TIAA-CREF, a financial-services firm.

Maybe steep costs are one driver behind another of the survey’s findings: Fully 37% of the respondents said they never seek out financial advice.

Another 45% said they seek out advice a few times per year, 13% said they get advice a couple of times a month and 4% said they get advice every week. Meanwhile, 46% of the survey respondents agreed that “now more than ever, I need a trusted place to go for financial advice.”

It’s not that surprising people are unsure whom to trust. In addition to the many stories of fraudsters who bilked investors out of billions of dollars—Bernie Madoff and R. Allen Stanford are just two that come to mind—financial advisers operate under myriad different rules and designations, and the method of payment can vary widely, too.

You might hire a certified financial planner, talk to your accountant or insurance broker, or work with an investment broker. You may pay that adviser an hourly fee, a percentage of your assets or an annual retainer, or that adviser may earn commissions on products you buy.

Increasingly, there are online-only investment-advisory options, too, such as Jemstep or Wealthfront, as well as companies that offer lower-cost access to financial planners, such as LearnVest and Rebalance IRA, among many others.

In the TIAA-CREF survey, among those who seek advice, 53% go to a financial adviser or consultant, 52% talk with friends or family, 40% use online tools, 35% go to a stockbroker or accountant, and 32% said “my primary bank.” (Those were the top five most popular responses; survey respondents could choose more than one.)

The survey findings echo another recent survey, conducted for AARP, which found that just 23% of savers “completely trust” their retirement-plan provider’s investment advice. Read: 401(k) advice: Can you trust it?

It takes work

When seeking advice, investors must, at the least, ask questions to confirm the adviser will act with their best interests in mind.

“What exactly are the fees and expenses? What is the actual service you will be providing for me? How have those asset-allocation recommendations been generated?” said Dan Keady, a certified financial planner and director of financial planning at TIAA-CREF.

With trust, “A lot of it has to do with disclosure,” he said.

Keep in mind, too, that registered investment advisers are held to a fiduciary standard—they’re required to act in the clients’ best interests. Most financial planners are investment advisers. Broker dealers are held to a lower standard: they must make sure the investments they recommend are suitable for your age and overall financial situation.

That’s not to say you can’t get good advice from a broker dealer, or bad advice from a registered investment adviser. But, given their legal obligations, you may reduce some of your risks by starting with an investment adviser.